In a significant case in China, a college student named Yang Qichao has been sentenced to 4 years and 6 months in prison and fined 30,000 yuan ($41,000) for fraudulently issuing a cryptocurrency called BFF on Binance’s BNB Chain.
The trial, held at the People’s Court of Nanyang High-tech Industrial Development Zone in Henan Province, is the first criminal trial in China involving the issuance of a virtual currency. China has strict regulations that prohibit the issuance, trading, or investing in cryptocurrencies.
Details Emerge in China’s First Crypto Fraud 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 alleged that Yang injected liquidity into the currency and then withdrew the funds, causing the value of BFF coins to depreciate significantly. One individual, Luo, who purchased BFF coins, suffered losses of 50,000 Tether’s USDT stablecoin (approximately 330,000 RMB).
Yang Qichao’s defense lawyer argued that Luo, “an experienced participant” in cryptocurrency transactions, should have been aware of the risks involved. The lawyer contended that Luo had a “clear understanding” of the speculative nature of crypto investments and acknowledged the industry’s lack of regulatory oversight. He questioned whether Luo’s decision to exchange 50,000 USDT coins for BFF coins resulted from misjudgment, given that virtual currency transactions inherently carry investment risks.
Debates and Implications of China’s First Crypto Fraud Trial
During the trial, a key issue debated was whether virtual currencies should be considered protected property under criminal law. Although cryptocurrencies do not possess currency attributes, the court acknowledged that they can be traded on international platforms, yielding economic benefits and demonstrating undeniable property characteristics. Consequently, the court recognized the conversion of the 50,000 USDT coins into the yuan as “a relevant factor” in determining the sentence.
The defense lawyer also argued that despite Luo’s initial claim of being defrauded, subsequent analysis of his transaction records revealed a series of rapid and profitable trades. This led to the assertion that Luo had actually profited from the investment, challenging the notion of fraud.
The case has sparked a broader discussion about the legal status and regulation of virtual currencies in China. With the country’s legal policies yet to fully recognize the legitimacy of virtual currencies, issues surrounding their issuance, trading, and protection remain ambiguous. The outcome of this case may serve as a precedent for future legal proceedings involving virtual currencies, shaping the legal landscape in this emerging field.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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