TechFlow news, according to The Paper, Yang Qichao, a post-00s university student, is a senior about to graduate from a university in Zhejiang. In early May 2022, he noticed a community self-governance organization named Qu Dong Wei Lai DAO, which was promoting and warming up for the issuance of a decentralized virtual token. He created a token named BFF with the same English name as Qu Dong Wei Lai, adding liquidity of 300,000 USDT and 630,000 BFF tokens. At the exact same second that Yang added liquidity, Luo某 spent 50,000 USDT to exchange 85,316.72 BFF tokens; just 24 seconds later, Yang withdrew the BFF liquidity, causing Luo某 to redeem only 21.6 USDT in return for 81,043 BFF tokens.
Luo某 demanded compensation from Yang Qichao for his losses but was refused. On May 3, 2022, Luo reported the case to the police, claiming he had been defrauded of over 300,000 RMB (converted from 50,000 USDT) in a virtual currency investment. Soon after, authorities opened a criminal investigation on suspicion of fraud and arrested Yang Qichao in Hangzhou, Zhejiang, in November of that year.
The first-instance court sentenced Yang Qichao to four years and six months in prison and imposed a fine of 30,000 RMB. During the appeal, defense lawyers argued for acquittal, pointing out that cryptocurrencies have unique contract addresses and therefore no "counterfeit coins" exist, and that both parties were experienced players fully aware of cryptocurrency trading risks.
This case marks the first criminal prosecution in China over the withdrawal of liquidity in a virtual currency transaction.
