Chinese Court Sees First Case of Mobile Rugpull University Student Sentenced to 4 Years and 6 Months for Coin Issuance
The first criminal case caused by the issuance of virtual currency has attracted wide 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 coins, causing losses to others, constituting fraud. On February 20, 2024, the People’s Court of Henan Province sentenced Yang Qichao to 4 years and 6 months in prison and fined him 30,000 RMB.
On May 20, 2024, the second instance of the case was heard. Yang Qichao’s defense lawyer continued to argue for his innocence, stating that the virtual currency issued by Yang Qichao had a unique and tamper-proof contract address, and there were no so-called “fake coins.” The defense lawyer pointed out that the victim Luo, as a senior virtual currency player, should have a clear understanding of the risks of speculation.
Yang Qichao’s withdrawal of liquidity caused a significant depreciation of BFF coins, and Luo exchanged only 21.6 BSC-USD for 81043 BFF coins. The defense lawyer argued that this type of liquidity withdrawal operation is common in virtual currency trading and does 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 activities.
In China, the legal status of virtual currency is still unclear. Both public security agencies and courts have stated that due to national legal prohibitions, the domestic value of the virtual currency involved in the case cannot be determined. However, the People’s Court of Nanyang in the first instance believed that although virtual currency does not have the attributes of legal tender, its property attributes cannot be denied.
The defense lawyer argued that Luo’s holding of BFF coins appreciated due to increased liquidity after the incident, and there was no actual loss. Transaction records showed that Luo automatically bought BFF coins through a script and “bottomed” Yang Qichao’s issued BFF coins three times within 7 minutes, claiming later to have been defrauded.
The report stated that the crime of fraud refers to the act of using deceptive methods to deceive and obtain large amounts of public or private property for the purpose of illegal possession. The prosecution accused Yang Qichao of inducing Luo to invest by creating false BFF coins and quickly withdrawing funds. The defense argued that the speculative nature of the virtual currency market determines investment risks, and as a senior player, Luo should be aware of these risks.
The defense lawyer believed that virtual currency investment activities are not protected by law, and both parties are engaged in illegal financial activities, so investors should not be protected even if they incur losses. The first-instance court’s determination contradicts national legal provisions and indirectly supports the exchange transactions between virtual currency and legal tender.
Ye Zhusheng, associate professor of the School of Law at South China University of Technology, believed that designating virtual currency as criminal property violates the principle of the unity of legal order, and criminal law protecting the security of virtual currency transactions indirectly promotes virtual currency trading activities, contrary to the goals of civil law and financial policy.
The defense lawyer emphasized that virtual currency trading is a high-risk investment activity, and trading losses depend on the timing of buying and selling. Luo did not incur losses throughout the investment process but instead made a profit, so it should not be considered fraud.
In the cryptocurrency trading market, there are many unfair and illegal activities that are not currently under legal jurisdiction. While calling for friendly regulation in the cryptocurrency community, it must be understood that fewer requirements for supervision also mean more risks to be borne. Once regulation includes protection under its jurisdiction, the cryptocurrency market will not have the current leniency.
