A Chinese court has sentenced a man to 10 years and nine months in prison for stealing 107 Bitcoin (BTC) after memorizing a victim’s wallet recovery phrase. The court in Qingdao, eastern China, found that Zhang took control of the funds without authorization and later converted them into cash. He also received a fine of 100,000 yuan.
The ruling has brought attention as it clarifies how Bitcoin fits into China’s criminal law framework. The fact that China does not recognize Bitcoin as legal tender and restricts crypto trading, prosecutors argued that it still carries economic value and should be treated as property. The court agreed, treating the stolen Bitcoin as a protected asset and reinforcing that virtual currencies can be covered under property crime provisions.
How the Bitcoin theft unfolded
According to the case summary posted by the Supreme People’s Procuratorate’s official WeChat account. The case began in July 2023 when a Bitcoin holder identified as Feng sought help converting 117 BTC into cash. Zhang had previously assisted with similar transactions. Therefore, Feng trusted him with the process.
At Zhang’s suggestion, Feng switched from a portable hard drive to a digital wallet. Zhang handled the registration process and wallet setup. During the process, Feng wrote down the wallet’s 12-word mnemonic phrase while reading each word aloud.
Zhang stood nearby and secretly memorized 11 words. Moreover, he remembered the first letter of the final word. Later that night, he tested possible combinations until he unlocked the wallet.
Driven by greed, Zhang transferred 107 BTC from Feng’s wallet. He then moved the funds through multiple wallets and eventually converted them into cash worth more than 660,000 yuan.
The next day, Feng recovered the Bitcoin that was missing. But Zhang appeared relaxed in his attempt to comfort Feng, which aroused more suspicion from the latter. After that, Feng sought help from a blockchain security company before turning to law enforcement for help.
The police started investigating the matter in October 2023, in collaboration with the blockchain experts, to trace wallet activity and IP addresses on the transactions. They later reconstructed the full flow of the stolen Bitcoin. Authorities found that Zhang moved the funds through multiple wallets before converting them into cash using a friend’s account.
Court recognizes Bitcoin as property
During the case, Zhang admitted moving the Bitcoin but claimed he only conducted a “protective takeover.” He also denied profiting from the transfers. The prosecutors refused to accept that claim. They offered transaction details explaining how Zhang converted the assets into Chinese Yuan. In addition, they pointed out that Bitcoin needs investments, has economic value, and is fully controlled by its owner.
The court accepted this reasoning. Hence, Bitcoin was considered a form of property in terms of criminal law and Zhang was convicted of theft. On April 28, last year, the Licang District Court handed down its judgment. The verdict was later upheld on appeal by the Qingdao Intermediate People’s Court.
Human threat vectors in Web3 security
Security analysts note that the Qingdao ruling highlights an ongoing vulnerability trend within Web3 security: human social engineering remains far more fragile than underlying cryptographic mathematics.
While a 12-word seed phrase is mathematically impossible to guess via blind network attacks, it offers zero defense against physical proximity compromises and trusted-helper scenarios. The milestone case serves as a stark reminder to institutional and retail holders alike that a recovery phrase carries the exact same weight as a physical bank vault combination, and should never be exposed to a third party.
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