Title: The Controversial Case of Yang Qichao and Virtual Currency Fraud
On June 6th, a fraudulent case involving virtual currency reported by The Paper News has sparked widespread attention in China. The main character is a young post-2000s college student named Yang Qichao, who issued a virtual currency called BFF on a public chain overseas and quickly withdrew liquidity, resulting in investor Luo losing 50,000 USDT coins. In the first trial, Yang Qichao was convicted of fraud and sentenced to 4 years and 6 months in prison, as well as a fine of 30,000 yuan. However, in the second trial, Yang Qichao’s defense lawyer argued for his innocence, stating that Yang Qichao’s actions complied with platform rules, and Luo should have been fully aware of the risks of investing in virtual currency.
As the first case involving the criminal offense of issuing virtual currency, this case has not only sparked intense debates in legal circles but also triggered widespread discussions in society. The high-risk nature of the virtual currency market and regulatory uncertainties have once again become the focus of public attention.
Although a definitive conclusion has not yet been reached, the various arguments presented in this case represent the current societal views and attitudes towards participation in virtual currency projects from both legal and regulatory perspectives.
According to the news report, lawyer Honglin summarized the core content and main arguments of the case. The prosecution argues that Yang Qichao orchestrated a carefully planned scam by creating a false BFF coin with the same name as a legitimate virtual currency, leading Luo to recharge 50,000 USDT coins and quickly withdraw funds, essentially defrauding Luo of his money. While virtual currency is not recognized as legal tender in China, its trading and economic benefits on international platforms demonstrate its property attributes, which the prosecution believes can be converted into a sentencing value in Chinese yuan.
On the other hand, the defense lawyer argues that the virtual currency issued by Yang Qichao has a unique and unchangeable contract address, complying with the technical standards of virtual currency trading and not constituting counterfeit currency. Additionally, the defense claims that Yang Qichao’s withdrawal of liquidity after issuing the virtual currency was a legal arbitrage action that did not violate platform rules. The defense also points out that Luo, as a seasoned player, should have been fully aware of the risks of virtual currency trading and that his participation was a high-risk speculative activity for which he should take responsibility for his investment decisions. Furthermore, the defense emphasizes that under current laws and regulations, virtual currency investment activities are not legally protected, and the transactions of both parties constitute illegal financial activities that should not be legally protected.
Luo insists that he was deceived, claiming that he purchased BFF coins at the same moment Yang Qichao added liquidity, but due to Yang Qichao’s swift withdrawal of funds, the value of the virtual currency he held significantly depreciated. He reported a loss of 50,000 USDT coins (equivalent to over 300,000 yuan) and believes that Yang Qichao fraudulently obtained his money through false advertising and rapid fund withdrawals. In court, Luo stated that he purchased BFF coins through a mobile trading platform inside a supermarket parking lot in Nanyang High-tech Zone, hoping to profit from early investments. He denied using scripts to automatically purchase BFF coins, claiming it was a manual operation and emphasizing that he was the victim.
The virtual currency market has always been filled with opportunities for speculation and arbitrage. From the early days of Bitcoin to the present, a variety of virtual currencies have emerged, attracting a large number of investors and speculators. The high volatility of virtual currencies and the relative lack of regulation have led to various arbitrage activities and potential scams in the market.
The controversy sparked by the Yang Qichao case actually reflects a common phenomenon in the virtual currency market – rapid arbitrage. While his defense lawyer attempted to explain his actions as legal arbitrage operations, for most ordinary investors, this rapid fund withdrawal appears more like a “pump and dump” scheme.
In the virtual currency trading market, arbitrage comes in various forms, some of which are legitimate market operations, while others operate in the gray area of law and morality. Some common virtual currency arbitrage methods include:
1. Brick-and-mortar arbitrage: exploiting price differences between different exchanges to buy low and sell high.
2. Triangular arbitrage: using price differences between different trading pairs within the same exchange to achieve risk-free profits.
3. Liquidity mining: providing funds to decentralized exchanges (such as Uniswap, SushiSwap) liquidity pools to earn transaction fees and platform rewards. This method is often accompanied by high returns and high risks.
4. Lending arbitrage: borrowing virtual currencies at low rates on one platform and depositing or pledging them at higher rates on another platform to profit from interest rate differentials.
5. Spot-futures arbitrage: exploiting price differences between the spot market and the futures market for arbitrage opportunities.
6. Arbitrage bots: using automated programs to execute high-frequency trades at the millisecond level to capture minimal market price differences. This method requires high technical expertise and capital.
7. Liquidity withdrawal arbitrage: rapidly withdrawing liquidity from decentralized exchanges, profiting from changes in token proportions in the liquidity pool. Such actions are sometimes referred to as “rug pulls” and are controversial both ethically and legally.
In such a market environment, how can investors protect themselves from similar fraudulent activities? Additionally, how can we define the boundaries between legal arbitrage and illegal fraud? These questions not only relate to the final judgment of the Yang Qichao case but also impact the future development of the virtual currency market.
As legal practitioners in the Web3 industry, the most absurd aspect of this case is that if investors profit from the virtual currency market, it is due to their own abilities and insights. However, when losses occur, resorting to law enforcement to try to recover those losses seems somewhat unreasonable.
The high-risk and volatile nature of the virtual currency market dictates that investors must have sufficient knowledge and judgment to make informed decisions, rather than blaming others for their investment mistakes or seeking state protection. Therefore, enhancing investor education and risk awareness is the fundamental way to avoid similar disputes and losses.
As a new financial instrument, virtual currencies have enormous potential but must operate within a legal framework to truly realize their value. We call on relevant authorities to promptly implement clearer virtual currency trading regulations and court judgment rules to protect investors’ interests and promote the healthy development of the industry.
