In a groundbreaking case that drew widespread attention in China, a university student named Yang Qichao was sentenced to four years and six months in prison and fined 30,000 RMB ($41,000) for “fraudulently” issuing a cryptocurrency called BFF on Binance’s BNB chain.
The case, heard at the Nanyang High-Tech Industrial Development Zone People's Court in Henan Province, is the first criminal case in China involving the issuance of virtual currencies. China has strict regulations prohibiting people from participating in the issuance, trading or investment of these assets.
Cryptocurrency Fraud Criminal Trial
According to local media reports, the incident began in May 2022, when Yang Qichao, a senior student at a university in Zhejiang, created a digital virtual currency called "Blockchain Future Force" (BFF) on the Binance Chain.
It is said that Yang Qichao injected liquidity into Binance and then withdrew the funds, causing the value of BFF coins to depreciate significantly. Luo, an individual who purchased BFF coins, lost 50,000 Tether's USDT stablecoins (equivalent to about 330,000 RMB).
Yang's defense attorneys argued that Luo, as a "veteran participant" in cryptocurrency trading, should have been aware of the risks involved.
The lawyer argued that Luo “clearly understood” the speculative nature of cryptocurrency investments and acknowledged the lack of regulatory oversight in the industry.
The lawyer questioned whether Mr. Luo’s decision to exchange 50,000 USDT coins for BFF coins was based on a misjudgment, given that virtual currency transactions inherently involve investment risks.
Profitability under suspected fraud
During the trial, the issue of whether virtual currency is property protected by the criminal law was also discussed.
Although cryptocurrencies do not possess monetary attributes, the court recognized that they can be traded on international platforms, generate economic benefits, and exhibit undeniable property characteristics.
Therefore, the court considered the exchange of $50,000 USDT into the country’s official currency, the renminbi, to be a “relevant factor” in determining the sentence.
Furthermore, the defense attorney stressed that despite Luo's initial claims that he was defrauded, subsequent analysis of his trading records showed that he had made a series of rapid and profitable trades. This led to the view that Luo actually made a profit from his investments, thus casting doubt on the claim of fraud.
The case has sparked widespread discussion on the legal status and regulation of virtual currencies in China, according to reports. Since China’s legal policies have not yet fully recognized the legality of virtual currencies, issues surrounding the issuance, trading and protection of virtual currencies remain unclear.
The outcome of this case could set a precedent for future legal proceedings involving virtual currencies, shaping the legal landscape in this emerging field.
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