The first criminal case arising from the issuance of virtual currency has attracted widespread attention in China. Yang Qichao, a college student, was charged with fraud because he withdrew his liquidity and was sentenced to 4 years and 6 months in prison in the first instance.
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ToggleYang Qichao’s issuance of virtual currency triggered criminal case
According to The Paper , "post-00s" college student Yang Qichao BSC (Binance Chain) issued a virtual currency abbreviated as BFF and got into legal disputes due to the withdrawal of liquidity.
The prosecutor's office accused Yang Qichao of issuing fake virtual coins and quickly withdrawing liquidity after others invested 50,000 USDT coins, causing losses to others and constituting the crime of fraud. On February 20, 2024, the Henan People's Court sentenced Yang Qichao to 4 years and 6 months in prison and a fine of 30,000 yuan in the first instance.
Second trial defense continues: There is no counterfeit currency
On May 20, 2024, the second instance of the case opened. Yang Qichao's defense lawyer insisted on defending his innocence, arguing that the virtual currency issued by Yang Qichao has a unique and non-tamperable contract address, and there is no so-called "counterfeit currency". He also pointed out that the victim, Luo, as a senior virtual currency player, was not aware of the risks of currency speculation. There should be clear understanding.
Key legal disputes
Does withdrawing liquidity constitute fraud?
Yang Qichao's withdrawal of liquidity caused the BFF currency to depreciate significantly. Luo exchanged 81,043 BFF coins for only 21.6 BSC-USD. The defense lawyer believes that this kind of liquidity withdrawal operation is common in virtual currency transactions and does not violate platform rules. Investors should bear their own risks. However, prosecutors believe Yang Qichao took advantage of the complexity and lack of supervision of virtual currency issuance to commit fraud.
The legal status of virtual currencies in China
The report stated that in China, the legal status of virtual currencies is still unclear. Both public security agencies and courts have stated that due to prohibitive provisions of national law, the value of the virtual currencies involved in the case cannot be assessed domestically. However, the Nanyang People's Court held in the first instance that although virtual currency does not have monetary attributes, its property attributes are undeniable.
Did the victim actually suffer a loss?
The defense lawyer proposed that the BFF currency held by Luo increased in value due to increased liquidity after the incident, and there was no actual loss. Transaction records show that Luo automatically bought BFF coins through a script, and "buy the dips" of BFF coins issued by Yang Qichao three times within 7 minutes, and then claimed to have been defrauded.
Criteria for identification of fraud crimes
The report stated that the crime of fraud refers to the use of deceptive methods for the purpose of illegal possession to defraud large amounts of public and private property. Prosecutors accused Yang Qichao of inducing Luo to invest by creating fake BFF coins and quickly withdrawing his investment. The defense believes that the gaming nature of the virtual currency market determines investment risks, and Luo, as a senior player, should be aware of the risks.
Should virtual currencies be protected by criminal law?
The defense lawyer believes that virtual currency investment activities are not protected by law, both parties are illegal financial activities, and investors should not be protected by law even if they suffer losses. The finding of the court of first instance ran counter to national laws and regulations, and supported the redemption transaction between virtual currency and legal currency in disguise.
Ye Zhusheng, associate professor at the School of Law of South China University of Technology, believes that identifying virtual currency as criminal property violates the principle of the unity of legal order. Criminal law protects the security of virtual currency transactions and indirectly promotes virtual currency trading activities, which is contrary to the goals of civil law and financial policy.
Legal understanding of virtual currency trading risks
The defense lawyer emphasized that virtual currency trading is a high-risk investment behavior, and trading losses depend on the timing of buying and selling. Luo did not lose money during the entire investment process, but made a profit. This should not be considered a fraud.
To speculate in currencies, one must be willing to fight and suffer.
The cryptocurrency trading market is full of unfair and illegal practices that are not governed by current laws. While the cryptocurrency community calls for regulatory friendliness, it must also be understood that the less supervision required, the more risks will need to be borne by oneself. Once regulation opens up the scope of jurisdictional protection, it will not allow the cryptocurrency market to have the current ease.
