A Chinese college student has been sentenced to over four years in prison for a crypto fraud involving the issuance and withdrawal of a self-created token.
According to The Paper, Yang Qichao was convicted of crypto fraud after issuing a virtual currency called Blockchain Future Force (BFF) and subsequently withdrawing its liquidity, resulting in significant financial losses for an investor.
Yang Withdraws Liquidity Shortly After Issuance
In May 2022, Yang became interested in a decentralized autonomous organization (DAO) named Blockchain Future Force, which was promoting the launch of its decentralized cryptocurrency. Inspired, Yang decided to create his own crypto on the BNB Chain.
Yang issued the BFF token on the same day and initially added liquidity by pairing 300,000 BSC-USD with 630,000 BFF tokens. However, shortly after adding liquidity, Yang withdrew the funds, an action known as “liquidity withdrawal.” This move significantly devalued the BFF tokens, causing losses 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 only a fraction of his original investment.
Legal Action and Sentencing
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 February 2, 2024, a court in Henan found Yang guilty of crypto fraud, sentencing him to four years and six months in prison and imposing 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 contended that both the defendant and the plaintiff were experienced crypto players aware of the risks involved in speculative investments.
Furthermore, the defense argued that the value of the BFF tokens held by the plaintiff increased after the incident due to added liquidity, allowing the plaintiff to redeem more USDT than before, thus suffering no actual losses.
This case marks the first instance in China where liquidity withdrawal after issuing a virtual currency has been brought to court. In China, virtual assets are not legally recognized, and investment losses are typically borne by the investor.
This landmark case has sparked widespread controversy and debate regarding the legal treatment of cryptocurrency fraud and the responsibilities of investors and issuers in the volatile crypto market.
