China’s First Crypto Fraud Case Sparks Debate
A young student in China has been handed a prison sentence of more than four years for engaging in a crypto scam involving the creation and withdrawal of a unique token.
As reported by The Paper, Yang Qichao was convicted of crypto fraud for launching a virtual currency called Blockchain Future Force (BFF) and promptly withdrawing its liquidity, resulting in substantial financial losses for an investor.
Yang’s Misdeeds Shortly After Token Launch
In May 2022, Yang came across a decentralized autonomous organization (DAO) known as Blockchain Future Force, which was hyping up the impending release of the community’s decentralized cryptocurrency. Intrigued by this, Yang decided to create his own digital currency on the BNB Chain.
On the same day, Yang introduced the BFF token and initially provided liquidity by pairing 300,000 BSC-USD with 630,000 BFF tokens. However, shortly after injecting liquidity, Yang withdrew the funds, an action referred to as “liquidity withdrawal.” This move caused a significant drop in the value of BFF tokens, resulting in losses for those who had invested in them.
One investor, Mr. Luo, exchanged 50,000 BSC-USD for 85,316.72 BFF tokens just before Yang withdrew the liquidity. Consequently, Luo’s investment rapidly depreciated, leaving him with only a fraction of his initial capital.
Luo managed to track down Yang through a mutual contact on WeChat and demanded compensation for his losses. When Yang refused, Luo reported the incident to the authorities, alleging that he had been swindled out of over 300,000 yuan (around 50,000 USD).
The police launched an investigation into suspected crypto fraud, leading to Yang’s arrest in November 2022. On February 2, 2024, a court in Henan found Yang guilty of the offense, resulting in a prison term of four years and six months, along with a 30,000 yuan fine.
Landmark Case of Crypto Fraud in China
On May 20, the case went to a second trial at an intermediate court, with Yang’s defense counsel continuing to assert his innocence.
The defense argued that both the defendant and the plaintiff were experienced crypto enthusiasts who were well aware of the risks associated with speculative investments in digital assets.
Furthermore, it was claimed that the plaintiff actually benefited from the incident as the value of the BFF coins they held increased due to added liquidity, allowing them to redeem more USDT than before and suffer no real losses.
This case, which involved withdrawing liquidity after issuing virtual currency, marks a significant milestone in China where virtual assets are not legally recognized, and investors bear the brunt of any investment losses.
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