The first criminal case caused by the issuance of virtual currency has attracted widespread attention in China. University student Yang Qichao was charged with fraud for withdrawing liquidity, and was sentenced to 4 years and 6 months in the first instance.
Yang Qichao issued a virtual currency, abbreviated as BFF, on BSC (Binance Smart Chain), which led to a legal dispute due to the withdrawal of liquidity. The prosecution accused Yang Qichao of issuing fake virtual currency and quickly removing liquidity after others invested 50,000 USDT tokens, causing losses to others, constituting fraud. On February 20, 2024, the Henan People’s Court sentenced Yang Qichao to 4 years and 6 months in prison and fined him 30,000 RMB.
On May 20, 2024, the second trial of the case was held. Yang Qichao’s defense lawyer insisted on pleading not guilty, arguing that the virtual currency issued by Yang Qichao had a unique and unchangeable contract address, and there were no “fake coins”. The defense lawyer pointed out that the victim Luo, as a senior virtual currency player, should have a clear awareness of the risks of trading virtual currency.
Yang Qichao’s withdrawal of liquidity caused a significant depreciation of BFF coins, and Luo exchanged only 21.6 BSC-USD with 81,043 BFF coins. The defense lawyer argued that such liquidity withdrawal operations are common in virtual currency trading and do not violate platform rules; investors should bear the risks themselves. However, the prosecution believed that Yang Qichao used the complexity and lack of regulation of virtual currency issuance to engage in fraudulent behavior.
Reportedly, the legal status of virtual currency in China is still unclear. Both public security agencies and courts have stated that due to national legal prohibitions, the domestic value of virtual currencies involved cannot be determined. However, the first-instance court in Nanyang believed that although virtual currencies do not have monetary attributes, their property attributes cannot be denied.
The defense lawyer argued that Luo’s holding of BFF coins appreciated after the incident, showing no actual losses. Transaction records showed that Luo automatically purchased BFF coins through a script and “bottomed out” three times within 7 minutes of Yang Qichao’s issuance of BFF coins, and then claimed to be defrauded.
The defense lawyer emphasized that virtual currency trading is a high-risk investment, and trading losses depend on the timing of buying and selling. Luo did not incur losses throughout the investment process; instead, he profited and should not be considered fraudulent.
In the cryptocurrency trading market, there are many unfair and illegal activities not subject to current legal jurisdiction. While the cryptocurrency community calls for friendly regulation, it must also understand that fewer regulations mean more risks to bear. Once regulations are introduced to provide protection, the cryptocurrency market will no longer have the current lax environment.