PRC student receives 4,5 years in prison for withdrawing $50 000 worth of BFF token liquidity

What’s new? China has concluded proceedings in the country’s first case involving the issuance of virtual currency, local publication The Paper reports. The defendant, 24-year-old student Yang Qichao, was sentenced to 4 years and 6 months in prison for a cryptocurrency fraud he issued on the BNB Chain blockchain from the largest centralized exchange (CEX) Binance.

Material by The Paper

What else is known? According to prosecutors, the student issued the token under the ticker BFF to mislead investors. The fact is that an asset with this name already exists: it is associated with the decentralized autonomous organization (DAO) Blockchain Future Force.

The victim, whose name was not disclosed, sent 50 000 USDT stablecoins from Tether to the fake asset’s liquidity pool, immediately after which Qichao withdrew all liquidity, causing the BFF coin to depreciate dramatically.

The defense argued that the token was not counterfeit because it had a unique and unalterable contract address, and both parties to the transaction were experienced crypto traders with an understanding of the risks involved. The attorneys also noted that liquidity withdrawal is a common practice in crypto trading and is not against the platform’s rules.

Separately, the defense side noted that the BFF had significantly increased in value after the incident, and the victim’s holdings of 72 381 tokens could be exchanged for 64 000 USDT.

Despite the defense attorneys’ arguments, the court found that the instantaneous withdrawal of liquidity constituted fraudulent acts directed at the victim. In addition to the prison sentence, Qichao was fined 30 000 Chinese yuan ($4140).

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Although crypto transactions and mining are banned in the PRC, the country’s Supreme Court approved the use of cryptocurrencies to pay off debts last May. Late last year, Chinese authorities began working on a roadmap for the development of the Web 3.0 sector.

In Hong Kong, where regulation of the crypto sector is more lenient, crypto exchanges are allowed to operate, and in late April, spot exchange-traded crypto funds (ETFs) based on bitcoin and Ethereum were launched on the local market.