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China’s First Crypto Fraud Criminal Case Sparks Controversy

Hongji Feng
Last updated: | 1 min read
China's First Crypto Fraud Criminal Case Sparks Controversy

A college student in China has been sentenced to over four years in prison for a crypto fraud related to the issuance and withdrawal of a self-created token.

According to The Paper, Yang Qichao was convicted of a crypto fraud after issuing a virtual currency called Blockchain Future Force (BFF) and subsequently withdrawing its liquidity, which led to significant financial losses for an investor.

Yang Withdraws Liquidity Shortly After Issuance

In May 2022, Yang noticed a decentralized autonomous organization (DAO) named Blockchain Future Force, which was promoting the pending launch of the community’s decentralized crypto. Yang was intrigued and decided to create his own crypto on BNB Chain.

Yang issued the namesake BFF token on the same day and initially added liquidity by pairing 300,000 BSC-USD with 630,000 BFF tokens.

Shortly after adding liquidity, Yang withdrew the funds, an act known as “liquidity withdrawal.” This move significantly devalued the BFF tokens, causing a loss for investors who had purchased the tokens.

One such investor, Mr. Luo, exchanged 50,000 BSC-USD for 85,316.72 BFF tokens just before Yang withdrew the liquidity. As a result, Luo’s investment quickly depreciated, leaving him with a fraction of his original investment.

Luo managed to trace Yang through a mutual WeChat friend and demanded compensation for his losses. When Yang refused, Luo reported the incident to the police, claiming he was defrauded of over 300,000 yuan (approximately 50,000 USD).

The police initiated a criminal case for suspected crypto fraud, leading to Yang’s arrest in November 2022. On Feb. 2, 2024, a court in Henan found Yang guilty of the crypto fraud, resulting in his prison sentence of four years and six months and a 30,000 yuan fine.

First Criminal Case Involving Crypto Fraud in China

On May 20, the second trial of the case was held at an intermediate court, while Yang’s defense lawyer continued to argue for his innocence.

The defense argued that both the defendant and the plaintiff were experienced crypto players aware of the risks of speculating in them.

Moreover, the value of the BFF coins held by the plaintiff increased after the incident due to added liquidity, meaning the plaintiff could redeem more USDT than before, thus suffering no actual losses.

The report stated that this case, brought to court for withdrawing liquidity after issuing virtual currency, is the first of its kind in China, where virtual asset is not legally recognized and losses in investment are borne by the investor.