The Risks and Legal Boundaries of Meme Tokens

Recently, a news report about a virtual coin issuance related criminal case has attracted widespread attention. This case involves a post-00s university student who issued meme tokens on an overseas public chain and was convicted and punished by our country's judicial authorities for fraud. Although similar cases are not uncommon, this incident has still sparked discussions about whether issuing meme tokens constitutes a crime and what specific charges it may involve.

Case Summary

In May 2022, a senior student named Yang noticed that an overseas DAO organization was promoting an ICO. On the afternoon of May 2, Yang issued a meme token called BFF on a certain overseas public blockchain that had the same name as the DAO in English. Subsequently, he added liquidity to the BFF project. Meanwhile, an investor named Luo quickly purchased a large amount of BFF coins. Just 24 seconds later, Yang withdrew the liquidity, causing the value of BFF to plummet, resulting in significant losses for Luo.

After the incident, Luo used his connections to ascertain Yang's identity and reported the case to the local public security bureau the next day. The police filed a case for suspected fraud and arrested Yang in November of that year.

Legal Disputes

The core dispute of this case is whether Yang's actions constitute the crime of fraud. The elements of the crime of fraud include:

1. The actor has the intention of illegally possessing someone else's property.
2. Engaged in "fabricating facts" or "concealing the truth" behavior
3. The victim fell into a misunderstanding and suffered property loss as a result.

The prosecution believes that Yang issued a false cryptocurrency with the same name as others and committed fraud by adding and withdrawing liquidity, constituting the crime of fraud.

However, there are viewpoints that believe this qualitative aspect is controversial. The main reasons include:

1. The victim may not have fallen into a subjective misunderstanding. The transaction records show that Luo completed the purchase at the same second Yang added liquidity, and this operational speed is likely achieved through automated trading programs.

2. The victim, Luo, may be a professional "coin trader" or "sniper". His trading records show a large number of high-frequency meme tokens trading activities, indicating extremely professional operations.

3. If the victim is trading using automated programs, then their property disposal behavior is not based on trust in the project, but purely an arbitrage behavior.

Based on the above analysis, there is an opinion that Yang's behavior may not constitute all the elements of the crime of fraud.

Legal Risk Warning

Although there is controversy over whether Yang's actions in this case constitute fraud, the issuance of meme tokens itself is still a high-risk behavior that may involve multiple legal risks:

1. Illegal Business Operations
2. Illegal fundraising crimes
3. Gambling-related crimes

It is particularly noteworthy that even when issuing cryptocurrencies overseas, if the project party is based domestically, it may still constitute the crime of illegally absorbing public deposits. Relevant regulatory policies remain effective, and ICO activities may face legal risks regardless of whether they are conducted domestically or abroad.

In the cryptocurrency sector, the definition of innovation and legal boundaries is still evolving. Participants should fully understand the relevant legal risks and act cautiously to avoid crossing legal red lines.