Key Takeaways:
The defendant was convicted of misleading an individual investor by falsely promoting a digital asset as a high-return opportunity. The man falsely claimed that the token had financial backing and would generate high returns after being listed on an exchange. The court ruled that the case constituted fraud rather than illegal fundraising, as it involved a single victim rather than a broader group of investors. Chinese authorities continue to strengthen enforcement against crypto-related financial crimes, including recent crackdowns on a money laundering network processing over CNY 1 billion ($136 million).A Guangdong court has sentenced a man to 11 years in prison for defrauding an investor through a cryptocurrency scheme.
The case involved the sale of a virtual asset, AA Token, which was falsely promoted as a high-return investment opportunity.
According to a report by Guangzhou Daily on February 25, the defendant, identified as Xie, misrepresented AA Token, based on AA Chain, as a promising digital asset with strong financial backing.
He convinced a victim, Wu, to invest CNY 990,000 in exchange for 1.6 million tokens.
Fraud Conviction Over AA Token Scheme
Xie claimed the token would be listed on ZB.com and generate high profits.
However, after receiving the payment, Xie only transferred part of the AA Tokens to Wu’s wallet, keeping the rest locked and non-tradable.
Following Wu’s repeated requests for either a resolution or a refund, Xie cut off contact. Wu reported the incident to authorities in late 2019, leading to Xie’s arrest.
The Shenzhen Futian District Court found Xie guilty of fraud, ruling that he had deliberately misled the victim to obtain funds.
The court determined that Xie’s actions violated financial laws but did not constitute illegal fundraising, as the fraud did not target a large group of investors.
Besides the11-years prison sentence, Xie was fined CNY 50,000 (~$7,000). The verdict has been finalized.
The court emphasized that fraudulent schemes disguised as blockchain investments remain a concern.
Officials urged the public to be cautious of high-return investment promises and reminded investors that virtual currencies lack legal recognition in China
China Intensifies Crackdown on Crypto-Related Crimes
Chinese authorities also recently cracked down on a money laundering network that processed over CNY 1 billion ($136 million) using crypto transactions.
The group used decentralized platforms and private wallets to facilitate illegal cross-border fund transfers.
Investigators linked over 30 suspects to the operation, which spanned multiple provinces.
Raids resulted in asset seizures, including digital currencies and high-value goods allegedly obtained through illicit transactions.
As China tightens its grip on crypto-related financial crimes, authorities face a continuous challenge in adapting to evolving tactics.
While stricter enforcement may disrupt some operations, underground networks are likely to develop more sophisticated laundering methods, leveraging decentralized tools and privacy-focused digital assets that make detection increasingly difficult.
The intersection of crypto and financial crime is forcing regulators worldwide to rethink enforcement strategies.
Other jurisdictions may follow with broader measures, including stricter compliance requirements for exchanges and wallet providers.
For crypto users, the lesson is clear: thorough due diligence remains essential in an environment where regulations continue to evolve.
Frequently Asked Questions (FAQs):
Chinese law distinguishes fraud from illegal fundraising based on the scale of the crime and its impact on the financial system. Fraud typically involves misleading an individual for personal gain, while illegal fundraising affects a broader group and disrupts financial order. In Xie’s case, the court ruled it as fraud since it targeted a single victim and did not threaten the financial system.
Those convicted of crypto-related fraud in China face severe penalties, including long prison sentences and hefty fines. As seen in Xie’s case, courts impose harsh sentences to deter fraudulent schemes that exploit digital assets, with punishments often exceeding a decade in prison.
China has intensified efforts to combat illicit crypto activities by dismantling underground financial networks and increasing monitoring of digital transactions. Authorities collaborate with banks and financial institutions to track suspicious activity and prevent unauthorized crypto-related transactions.
China’s strict stance on crypto influences global markets by restricting liquidity and reducing retail investor participation. Its bans on trading and mining have led to shifts in global crypto activity, with miners and investors relocating to jurisdictions with more favorable regulations.
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