A court in Qingdao, eastern China, handed a prison sentence of 10 years and nine months to a man who stole 107 Bitcoin from an acquaintance by memorizing 11 of the wallet’s 12 recovery phrase words. The authorities also imposed a fine of 100,000 yuan (around $14,700) after confirming he gained unauthorized control of the victim’s crypto wallet and liquidated the assets.
The victim, Feng, had asked Zhang, someone familiar with Bitcoin transactions, to assist with cashing out 117 Bitcoin in mid-2023. During the wallet setup, Feng recorded the 12-word seed phrase, which Zhang memorized almost entirely, reconstructing the missing final word later to transfer 107 Bitcoin to his own control. Investigators traced the illicit transfers after Feng reported the missing funds and linked the digital trail directly to Zhang.
Although Zhang admitted to moving the Bitcoin, he claimed he was safeguarding the assets and had not profited, alleging losses from subsequent speculation. Prosecutors contradicted this defense with electronic evidence showing Zhang converted the funds into cash, realizing over $97,000.
This case underlines the continuing legal recognition of Bitcoin as property in China, where cryptocurrency mining and trading have been banned, but theft involving digital assets is prosecutable under criminal law. The Supreme People’s Procuratorate’s WeChat account published the summary of the ruling, reinforcing the government's stance on digital asset crimes.
Experts in crypto security highlight that the primary vulnerabilities arise from human factors rather than technical flaws. The 12-word recovery phrase is generally secure against brute-force attacks, but some recommend using longer phrases—such as 24 words—to enhance security. The incident also warns about the dangers of revealing recovery phrases, even to trusted acquaintances, emphasizing that “momentary exposure” during wallet setup can still lead to significant losses.