A Chinese court sentenced Zhang to 10 years and nine months in a Bitcoin theft case involving 107 BTC. Prosecutors said he memorized most of a recovery phrase. The phrase later gave him control of Feng’s wallet during transfer preparations.
The case began in July 2023, when Feng asked Zhang to help convert 117 Bitcoin. An earlier transaction, in which Zhang helped, established trust between the two men. Feng then allowed him to assist with creating a new digital wallet.
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Bitcoin Theft Probe Followed On-Chain Transfers
In the setup, Feng wrote down the 12-word recovery phrase of the wallet with Zhang looking on. Prosecutors stated that Zhang memorized 11 words and the first letter of the last word. He later tried out various words, got into the wallet, and transferred 107 Bitcoin.
The next day, Feng found the missing assets and reached out to a blockchain security company. He subsequently reported the bitcoin theft to the police. Authorities opened an investigation in October 2023 and started tracing the on-chain transfers.
Investigators analyzed wallet records and transactions and associated IP addresses. They said that evidence pointed to Zhang in the transfers. In addition, the probe tracked the assets through a number of wallets since the Bitcoin theft.
Zhang admitted moving the Bitcoin but denied that he meant to steal it. He said the transfer was a “protective takeover,” designed to stop another theft. Records of his transactions were inconsistent with his explanation, prosecutors said.
The police also came across funds that could be related to the stolen assets. Over $97,000 (660,000 yuan) had been deposited into the bank account of a friend. That was the figure that prosecutors relied on in the Bitcoin theft case.
China Court Weighs Bitcoin Property Status
The legal debate was about whether Bitcoin could be considered a property. According to the prosecutor, the current policy doesn’t give virtual currencies legal tender status. However, the same policy does not deny their property attributes.
According to the Licang District People’s Procuratorate, Bitcoin possesses economic value and provides exclusive control to its holders. The control relies on private keys and recovery phrases. Prosecutors said those characteristics enabled Bitcoin to be the target of theft.
There is no official rate of Bitcoin in China for criminal calculations. Therefore, realized cash proceeds were used to determine the amount of theft. This prevented the sentencing of all 107 Bitcoin being valued at market rates.
The Licang District People’s Court convicted Zhang of theft on April 28, 2025. It found him guilty in the Bitcoin theft case and fined him 100,000 yuan. His appeal was dismissed by the Qingdao Intermediate People’s Court on November 10, 2025.
The decision does not affect China’s general restrictions on crypto trading and related services. Bitcoin remains not legal tender in mainland China.
The Bitcoin theft case demonstrates that courts will possibly still favor orders for the return of crypto following exposure of recovery phrases in the context of setting up or transferring wallets.
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