Chinese student sentenced to 4 years in prison for $300,000 in cryptocurrency

A Chinese university student has been sentenced to more than four years in prison for what appears to be the first case of fraud involving the withdrawal of crypto cash in China.

Yang Qichao, a student, was sentenced to 4.6 years in prison for scamming investors with his token named BFF created on a public blockchain outside of China. According to a report by Chinese newspaper The Paper, prosecutors claim that after attracting a $50,000 investment in USDT, a stablecoin issued by Tether, Yang quickly removed liquidity from the token, resulting in the total loss of the amount for the investor.

Prosecutors say Yang issued a fake BFF token with the same name as the token promoted by a decentralized autonomous organization (DAO), Blockchain Future Force, to mislead investors. The government claims Yang tricked the victim, identified as Luo, into investing by initially adding $300,000 to BFF's cash pool. Luo then exchanged $50,000 in USDT from Tether for 85,316 BFF. Just 24 seconds later, Yang withdrew liquidity, leading to a drastic devaluation of Luo's BFF tokens, the report said.

Yang's defense argued that the BFF token was genuine with a unique, immutable contract address, and that both parties involved were experienced crypto traders aware of the risks. The defense also argued that cash withdrawal is a common practice in crypto trading and is not against the platform's rules.

Additionally, the defense argued that the BFF token had appreciated significantly since the incident and that Luo's current holdings of 72,381.7198 BFF tokens could be exchanged for more than $64,000 in USDT.

However, prosecutors stressed that Yang's rapid withdrawal of cash constituted “dishonest actions” aimed at “deceiving and defrauding Luo.” The Chinese court later found Yang guilty of fraud, sentencing him to prison and a fine of 30,000 yuan (~$4,140).