Beware of Pitfalls: Discussing the Legal Risks of Crypto Assets Issuance

Recently, a news report has sparked widespread discussion in the Crypto Assets community. The report states that a post-00s university student was convicted of fraud by domestic judicial authorities for issuing a Crypto Asset on an overseas public chain and withdrawing liquidity. Such cases are not uncommon, but it has once again raised people's awareness of the legal risks associated with the issuance of Crypto Assets.

Case Review

In May 2022, a senior student named Yang issued a Crypto Asset called BFF on a certain overseas public chain. He then injected 300,000 BSC-USD and 630,000 BFF as liquidity into the project. At the same second the liquidity was added, an investor named Luo immediately exchanged 50,000 BSC-USD for a large amount of BFF coin.

Just 24 seconds later, Yang withdrew the liquidity of the BFF coin, causing its value to plummet. The value of the BFF coins purchased by Luo instantly evaporated. Subsequently, Luo reported to the police that he was defrauded of more than 300,000 yuan. The police launched an investigation into Yang for suspected fraud and arrested him.

Legal Disputes

The prosecution accused Yang of committing fraud by creating fake Crypto Assets and quickly withdrawing funds. However, there are differing opinions on whether Yang's actions constitute the crime of fraud.

One view holds that Yang's issuance of a Crypto Asset with the same name as others and his quick withdrawal of funds constitutes the elements of fraud. As a result, the victims fell into a false perception and suffered financial losses.

Another perspective holds that this case may not constitute fraud. The reasons are as follows:

1. The victim, Luo, is very likely a professional Crypto Assets trader, using automated trading programs for operations. He completed the purchase in the same second that the project added liquidity, a speed of operation that is difficult to achieve manually.

2. There are signs that Mr. Luo frequently engages in such high-risk transactions. His trading records show a large number of similar operations, and he is able to complete buy-sell arbitrage in a very short time.

3. Based on the above analysis, Luo may not have fallen into erroneous cognition, and his property disposal was not directly operated by him. Therefore, it is difficult to determine that Yang's behavior constitutes fraud.

Legal Risk Warning

Although Yang's actions in this case may not constitute fraud, the issuance of Crypto Assets still carries significant legal risks and may involve multiple charges such as illegal business operations, illegal fundraising, and gambling. Especially under the current regulatory policies, regardless of whether the project operates domestically or internationally, as long as the project party is based in the country, there is a possibility of facing legal accountability.

For those intending to enter the Crypto Assets field, it is recommended to fully understand the relevant laws and regulations, and to prudently assess risks. At the same time, investors should also remain vigilant and be cautious when participating in high-risk investment activities. In this rapidly evolving field, the legal boundaries are not always clear, and maintaining a prudent attitude is crucial.