A 00s college student was sentenced to four years in prison for fraud after issuing a cryptocurrency—while others report losses from trading and call the police?
TechFlow Selected TechFlow Selected
A 00s college student was sentenced to four years in prison for fraud after issuing a cryptocurrency—while others report losses from trading and call the police?
Courts often lack a clear and uniform adjudication standard when handling such cases.
Navigating Web3 tides with focused insightsBy ManQin Blockchain Legal Services
Case Overview
On June 6, a fraud case involving cryptocurrency that was reported by The Paper attracted widespread attention in China. The central figure is Yang Qichao, a young "post-00s" college student, who issued a cryptocurrency named BFF on a public blockchain overseas and quickly withdrew liquidity, causing investor Luo to lose 50,000 USDT. In the first-instance ruling, Yang was convicted of fraud and sentenced to four years and six months in prison, along with a fine of 30,000 yuan. However, during the second trial, Yang’s defense lawyer argued for acquittal, claiming that Yang's actions complied with platform rules and that Luo should have fully understood the risks associated with cryptocurrency investments.
As the first criminal case in China involving the issuance of cryptocurrency, this incident has not only sparked intense legal debate but also triggered broad social discussion. The high-risk nature of the crypto market and regulatory uncertainty have once again become focal points of public concern.
Although no definitive conclusion has been reached yet, the arguments presented in this case represent current societal, legal, and regulatory perspectives toward participation in cryptocurrency projects.
Positions of Prosecution and Defense
Based on media reports, Honglin Law Firm has summarized the core facts and main positions from all parties involved.
Prosecution: A Carefully Orchestrated Scam
The prosecution insists that Yang created a fake BFF coin with the same name as QuDong Future’s legitimate cryptocurrency, luring Luo into depositing 50,000 USDT before swiftly withdrawing funds—effectively defrauding Luo. Although cryptocurrencies are not recognized as legal tender in China, their tradability on international exchanges and economic value demonstrate property attributes, which the prosecution argues can be converted into RMB for sentencing purposes.
Defense: Legitimate Arbitrage Behavior
The defense argues that the cryptocurrency issued by Yang had a unique and immutable contract address, conforming to technical standards of blockchain transactions and thus did not constitute counterfeit currency. Furthermore, withdrawing liquidity after issuing a token is a legal arbitrage practice and does not violate platform rules. The defense emphasizes that Luo, as an experienced player, should have clearly understood the risks of crypto trading. His participation constituted high-risk speculation, and he should bear responsibility for his own investment decisions. Additionally, under existing laws and regulations, cryptocurrency investment activities are not protected by law, and both parties engaged in illegal financial activity; therefore, any losses incurred should not be legally recoverable.
Victim’s Perspective: An Innocent Investor
Luo insists he was deceived. He purchased BFF tokens in the exact same second that Yang added liquidity, but due to Yang’s rapid withdrawal, the value of his holdings plummeted. He reported a loss of 50,000 USDT (approximately 300,000 RMB), alleging that Yang obtained his funds through false promotion and swift fund withdrawal. In court, Luo stated he bought the BFF tokens via a mobile trading platform while parked at a supermarket in Nanyang High-Tech Zone, hoping to profit from early-stage investment. He denied using automated scripts, asserting it was a manual purchase, and emphasized his status as a victim.
Speculation and Arbitrage in Cryptocurrency Markets
The cryptocurrency market has always offered abundant opportunities for speculation and arbitrage. From Bitcoin’s early days to today’s diverse array of digital assets, countless investors and speculators have been drawn in. High volatility and relatively lax regulation have led to numerous arbitrage strategies—and potential scams—across the ecosystem.
The controversy surrounding Yang Qichao’s case reflects a common phenomenon in the crypto space: rapid arbitrage. While his defense attempts to frame the act as legitimate arbitrage, to most ordinary investors, such quick withdrawals resemble a classic “pump-and-dump” scam.
In cryptocurrency markets, arbitrage takes many forms—some are legitimate market operations, while others operate in legal and ethical gray areas. Below are some common types of crypto arbitrage:
-
Cross-exchange arbitrage ("bricking"): Exploiting price differences between different exchanges by buying low on one exchange (e.g., Exchange A) and selling high on another (e.g., Exchange B) to capture the spread.
-
Triangular arbitrage: Taking advantage of pricing inefficiencies among three trading pairs within the same exchange—for example, BTC/ETH, ETH/USDT, and BTC/USDT—to execute fast trades and earn risk-free profits.
-
Liquidity mining: Providing capital to liquidity pools on decentralized exchanges (like Uniswap or SushiSwap) to earn transaction fees and platform rewards. This method often comes with high returns and high risks.
-
Lending arbitrage: Borrowing crypto at low interest rates on one platform and depositing or staking it at higher rates elsewhere to profit from the rate differential.
-
Futures-spot arbitrage: Capitalizing on price discrepancies between spot and futures markets—for instance, buying Bitcoin in the spot market while shorting the same amount in the futures market to lock in risk-free gains.
-
Arbitrage bots: Using automated programs to conduct high-frequency trading at millisecond speeds, capturing tiny price spreads. This approach requires significant technical expertise and capital investment.
-
Liquidity withdrawal arbitrage: Adding liquidity to a decentralized exchange and then rapidly removing it, manipulating token ratios in the pool to generate profit. This practice is sometimes referred to as a “rug pull,” and remains ethically and legally controversial.
In such a market environment, how can investors protect themselves from similar harms? And more importantly, where should the line be drawn between legal arbitrage and illegal fraud? These questions go beyond the final verdict in Yang’s case—they directly impact the future development of the entire cryptocurrency market.
ManQin Legal Perspective
Currently, the legal status of cryptocurrencies remains unclear in many jurisdictions. Regulatory approaches vary widely—some countries have established clear legal frameworks, while others are still exploring appropriate policies. For example, the U.S. and EU enforce strict regulations requiring crypto exchanges and related businesses to comply with anti-money laundering (AML) and counter-terrorism financing (CFT) requirements. In 2019, the U.S. SEC sued Telegram over its blockchain project, ultimately ruling its ICO illegal and ordering full refunds to investors. In China, cryptocurrency trading and ICOs (Initial Coin Offerings) are completely banned. The government has repeatedly issued notices clarifying that cryptocurrencies do not have legal tender status and that investment and trading activities are not protected by law.
Moreover, the crypto market continues to innovate—from decentralized finance (DeFi) to non-fungible tokens (NFTs)—attracting massive capital and investor interest. Yet these emerging sectors come with substantial risks and uncertainties. Frequent incidents like DeFi hacks and smart contract exploits, alongside NFT market bubbles and speculative frenzies, highlight the extreme complexity and volatility of the crypto landscape.
The high risk of the crypto market stems not only from price swings and technical vulnerabilities but also from rampant fraud and illegal fundraising. Despite repeated warnings from governments and regulators, the lure of high returns continues to attract uninformed investors.
In mainland China, criminal cases involving cryptocurrencies are increasing, reflecting growing legal and investment risks. For example, in 2018, Shenzhen police cracked a cloud-mining Ponzi scheme involving hundreds of millions of RMB. Criminals used the promise of high crypto returns to sell fake “mining machines.” That same year, Hangzhou authorities dismantled an illegal fundraising operation using cryptocurrencies, with over 1 billion RMB involved and thousands of victims.
However, when handling such cases, courts often lack consistent and clear judicial guidelines, creating significant uncertainty for grassroots judicial personnel and litigants alike. For instance, although the Supreme People’s Court has previously ruled in guiding cases against recognizing conversion between cryptocurrencies and fiat currency, the first-instance court in the Yang Qichao case acknowledged the property value of crypto—a sign of inconsistency in judicial practice.
As legal practitioners in the Web3 industry, we find the most absurd aspect of this case to be: if you make money investing in crypto, it's credited to your skill and foresight; but if you lose money, you call upon state power to file a police report and seek recovery. That double standard is fundamentally unreasonable.
The high-risk and volatile nature of the cryptocurrency market demands that investors possess sufficient knowledge and judgment—not shift blame onto others or expect state protection when their bets go wrong. Therefore, enhancing investor education and risk awareness is the fundamental way to prevent such disputes and losses.
Cryptocurrencies, as a novel financial instrument, hold immense potential—but they must operate within a clear legal framework to truly realize their value. We urge relevant authorities to promptly establish clearer regulations for crypto trading and clearer judicial standards, protecting investor interests while fostering healthy industry growth.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
