Chinese Student Challenges Prison Sentence Over Token Liquidity Withdrawal

In China, a legal battle continues involving a 24-year-old student accused of issuing a token on the BNB Chain blockchain and allegedly withdrawing liquidity from investors amounting to at least 50,000 USDT. This was reported by local media.

According to court documents, in May 2022, the defendant, Yang Qichao, launched a token for the DAO project Blockchain Future Force, releasing a coin named BFF on the BNB Chain. He added liquidity to the protocol amounting to 300,000 BSC-USD and 630,000 BFF.

Immediately after, an external user, Luo, spent 50,000 BSC-USD to purchase 85,316.72 BFF. Twenty-four seconds later, Yang Qichao withdrew all liquidity from the protocol, receiving 353,488.115 BSC-USD and 508,069.878 BFF. This operation led to a significant devaluation of the BFF coins. Consequently, Luo was able to sell 81,043 BFF for only 21.6 BSC-USD.

The victim reported the incident to the police, and in November 2022, Yang was detained. The prosecution accused him of issuing fake virtual coins and fraud.

On February 20, 2024, a first-instance court found the student guilty, sentencing him to 4.5 years in prison and a fine of 30,000 yuan (~$4,100).

The defense is currently appealing the decision. They argue that the token issued by Yang cannot be considered fake, as it has a unique smart contract address. Furthermore, the mentioned company, Blockchain Future Force, later issued coins under different tickers — BFFT and BFFA.

The lawyers shift responsibility for the unsuccessful trades to the victim, Luo, who, they claim, should have been aware of the risks of cryptocurrency trading. Based on the timing of his transactions, the defense suggested that Luo executed the trade via an automated market maker.

They established that after the sharp drop in the token’s price, the trader continued trading, resulting in a final wallet balance of 72,381.7198 BFF. At the time of the trial, the BFF coins had significantly increased in value, reaching an equivalent of 64,065.7134 USDT.

Despite Luo being unable to access these assets during the hearings, the defendant’s lawyers argue that the plaintiff did not incur actual losses.

Among other points, the lawyers mentioned the illegal status of cryptocurrency transactions in China, which precludes legal protection for investors.

The case remains under review.

Back in September 2021, the People’s Bank of China, in a joint statement with nine government departments, classified cryptocurrency operations as illegal financial activities.

In February 2022, China tightened criminal liability for illegal fundraising in digital assets. At the same time, the Shanghai High Court recognized bitcoin as a virtual asset with economic value protected by law.

Earlier, ForkLog reported that in August 2023, a Chinese citizen was sentenced to nine months in prison for purchasing USDT worth 94,988 yuan (just over $13,000).