Good day everyone,
I hope you are all well and having excellent day, welcome to CryptoGod-1’s blog on all things crypto. In this post I will be looking at the fallout from China's first Cryptocurrency Fraud Case, along with the controversy and debate which followed it.
China's First Crypto Fraud Criminal Case
The People's Republic of China have witnessed the first fraud criminal case in relation to cryptocurrency within the nation as a college student in China was sentenced to over four years in prison. This was related to the issuance and withdrawal of a self-created token. The student, known as Yang Qiacho, was convicted of a crypto fraud after the digital currency he issued, known as Blockchain Future Force (BFF), saw its liquidity withdrawn and ultimately this led to significant financial losses for investors.
Back in May of 2022 Yang realised the opportunity when he noticed a decentralised autonomous organisation (DAO) called Blockchain Future Force was promoting the pending launch of the community’s decentralized crypto token. Yang was impressed by the DAO and decided to create his own version of the token on the BNB Chain (Binance).
Yang named the token BFF and on the same day he added liquidity by pairing 300,000 BSC-USD with 630,000 BFF tokens. Investors saw the token and decided to purchase some for themselves, but shortly after Yang had added the liquidity he withdrew the funds. This is known as “liquidity withdrawal” within the crypto space, and this led to losses for investors who had purchased the token. His withdrawal of liquidity saw the value of the token plummet, and one such investor lost 50,000 BSC-USD.
This investor, known as Mr. Luo, had exchanged 50,000 BSC-USD for 85,316.72 BFF tokens just before Yang withdrew the liquidity. The move by Yang saw Luo's investment quickly depreciated and leave him with only a small portion in terms of value from his original investment.
Luo was in a panic but thanks to a mutual WeChat friend he was able to trace down Yang. Luo demanded compensation for his losses, but Yang refused. This led to Luo reporting the crime to the authorities, and he claimed to have been defrauded of over 300,000 yuan (approximately 50,000 USD). From there the police launched a criminal investigation for suspected cryptocurrency fraud, which led to Yang’s arrest in November 2022.
A court in Henan found Yang guilty of the crypto fraud on the 2nd of February 2024. This resulted in a prison sentence of four years and six months along with a 30,000 yuan fine for Yang. The second trial of the case was heard on the 20th of May this year, and was held at an intermediate court. Yang's defence lawyer continued to argue for his innocence and noted that both the defendant and the plaintiff were experienced crypto players. Therefore they argued that Luo should have been aware of the risks of speculating in cryptocurrency.
The most interesting part of the case was the fact that the value of the BFF token increased in time due to added liquidity. This meant the plaintiff could redeem more USDT than he had originally invested, and ended up suffering no actual losses. The report noted that this case, which was brought to court for withdrawing liquidity after issuing virtual currency, was the first of its kind in China. Currently virtual assets are not recognised as legal tender and any losses through investment are considered borne by the investor.
Have a great day.
Peace. CryptoGod-1.
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