Summary:

A court in Qingdao, China, sentenced a man to 10 years and nine months in prison for stealing 107 BTC.
The theft occurred after the perpetrator memorized 11 words of a victim's 12-word Bitcoin wallet recovery phrase.
Prosecutors argued that Bitcoin qualifies as "property" under Chinese criminal law and can therefore be stolen.
The defendant was also fined 100,000 yuan (around $14,700).
The case highlights growing legal recognition of digital assets and the continuing importance of wallet security.

A court in eastern China has delivered a significant ruling involving Bitcoin ownership and digital asset theft, sentencing a man to nearly 11 years in prison after he stole 107 Bitcoin by reconstructing a wallet recovery phrase he had partially memorized. Beyond the prison sentence itself, the case has drawn attention because prosecutors and the court treated Bitcoin as a form of property protected under criminal law. That legal classification played a central role in securing the conviction and could become an important reference point for future cryptocurrency-related cases in China. The ruling comes despite years of restrictions on cryptocurrency trading and mining across the country, showing that while digital asset activities remain heavily regulated, courts may still recognize ownership rights when theft occurs.

According to a case summary published by the Supreme People's Procuratorate's official WeChat account, the Licang District People's Court in Qingdao sentenced a man identified as Zhang to 10 years and nine months in prison and imposed a fine of 100,000 yuan, or approximately $14,700.

Source

The incident dates back to July 2023, when a Bitcoin holder identified as Feng sought assistance from Zhang, an acquaintance who had previously helped facilitate Bitcoin-related transactions. Feng intended to cash out 117 Bitcoin and relied on Zhang's experience during the process. While Feng was creating or managing the wallet, he wrote down the wallet's 12-word recovery phrase. During that process, Zhang reportedly managed to memorize 11 of the 12 words. Investigators later determined that Zhang reconstructed the final word and used the complete phrase to gain access to the wallet. Once access was obtained, Zhang transferred 107 Bitcoin out of the wallet without authorization. At the time, the stolen assets represented a substantial amount of money. The case quickly evolved from a dispute between acquaintances into a criminal investigation involving digital assets, electronic evidence, and questions about how Bitcoin should be treated under Chinese law.

How Investigators Tracked the Missing Bitcoin

When Feng discovered the missing Bitcoin, he reported the theft to authorities. Investigators began tracing the blockchain transactions and examining electronic records connected to the movement of funds. Unlike traditional cash theft cases, cryptocurrency transactions leave a permanent record on public blockchains, allowing investigators to follow the movement of assets between addresses. Authorities ultimately linked the transfers to Zhang. During the investigation, Zhang admitted that he had moved the Bitcoin. However, he disputed the characterization of his actions. According to the case summary, Zhang claimed he had merely been "protecting" the assets and argued that he had not profited from the transfers. He also stated that he later suffered losses while speculating on Bitcoin's price movements.

Prosecutors rejected that explanation. They argued that transaction records, wallet activity, and financial evidence demonstrated that Zhang had converted the assets and realized proceeds exceeding $97,000. The court ultimately agreed with the prosecution's position. In many ways, the case demonstrates that while crypto transactions can occur without banks, they are not necessarily invisible to investigators once authorities begin tracing funds. Following the ruling, prosecutors highlighted the broader significance of the case. According to the published summary:

"The successful handling of this case has accumulated experience for the procuratorial organs in handling new types of crimes involving virtual currencies." Source

That statement suggests authorities view the case as more than a simple theft prosecution. It also serves as a practical example of how legal institutions are adapting to crimes involving digital assets.

Why the Ruling Matters Beyond the Theft

China has spent years tightening restrictions on cryptocurrency activities. Authorities have prohibited many forms of crypto trading, cracked down on mining operations, and issued multiple warnings regarding digital asset risks. Yet despite those restrictions, prosecutors argued that Bitcoin still satisfies the legal definition of property. That distinction matters because criminal theft laws generally apply to property rights. If an asset is not recognized as property, pursuing theft charges becomes significantly more complicated. In this case, prosecutors successfully argued that Bitcoin can be owned, controlled, transferred, and unlawfully taken from another person. The court's acceptance of that argument allowed the theft charges to proceed under existing criminal law.

The decision reflects a position that has increasingly appeared in several Chinese legal discussions in recent years. While cryptocurrency trading may face restrictions, ownership rights and property protections can still exist when disputes or crimes arise. The ruling also shines a spotlight on one of the oldest risks in cryptocurrency: human error. The theft did not involve sophisticated hacking software, network vulnerabilities, or advanced cryptographic attacks. Alvin Kan, Chief Operating Officer at Bitget Wallet, said the case demonstrates that many wallet security threats originate from human behavior rather than technical weaknesses. According to Kan, standard 12-word recovery phrases remain highly secure from a cryptographic perspective and are effectively impossible to brute-force using current technology. However, he noted that 24-word recovery phrases provide an even higher level of security and could become more widely adopted across the industry. Many users understand that they should not take screenshots of recovery phrases or store them online. Far fewer consider the possibility that someone physically present during wallet setup could observe or memorize the phrase. As Kan explained, even brief exposure can create security risks if sensitive wallet information is revealed to another person.

The Qingdao case serves as a reminder that cryptocurrency security often depends as much on personal habits as it does on technology. A recovery phrase remains the master key to a wallet, and once another person gains access to it, the strongest blockchain security mechanisms offer little protection.