China Court Upholds 107 BTC Theft Conviction Over Stolen Seed Phrase

A Chinese court has upheld a Bitcoin theft conviction that turns a seed phrase into a brutally simple lesson: if someone gets the words, they can get the coins. In this case, a man memorized a wallet recovery phrase, stole 107 BTC, and was sentenced to more than 10 years in prison.

• 107 BTC stolen after a recovery phrase was memorized
• Bitcoin treated as property under Chinese criminal law
• 10 years and 9 months in prison, plus a 100,000-yuan fine
• Crypto trading remains restricted in China despite the ruling

The case centers on Zhang, who was asked by Feng to help convert 117 BTC. According to the court record, Zhang watched Feng write down his wallet recovery phrase, memorized 11 of the 12 words plus the first letter of the final word, and later reconstructed the phrase well enough to take over the wallet. He then moved the Bitcoin to addresses he controlled.

That is the ugly side of self-custody in plain English: a recovery phrase is the set of 12 or 24 words that can unlock a wallet, and in many cases it is the master key. If someone sees it, even briefly, the wallet is no longer yours in any meaningful sense.

How the theft unfolded

Feng noticed the missing BTC the next day and contacted a blockchain security company before going to police. The investigation, which began in October 2023, relied on wallet records, transaction data, and linked IP addresses. Bitcoin may be digital, but it still leaves a trail. The blockchain is not magic smoke; it is a public ledger, and transactions can be traced when investigators know what to look for.

Zhang tried to explain the transfer as a “protective takeover” and claimed he had not cashed out. Investigators were not buying that fairy tale. Transaction records showed more than 660,000 yuan in proceeds, roughly $97,000, sent to a friend’s bank account. That is not “protecting” someone else’s Bitcoin. That is theft with a side of weak excuses.

The details matter here because they show how crypto theft cases are often solved. The chain itself provides evidence, but law enforcement still needs the boring, old-school part: linking wallet activity to a person, a device, an account, or a cash-out route. In other words, blockchain tracing is useful, but it is not a substitute for real investigative work.

Why the court treated Bitcoin as property

Prosecutors argued that Bitcoin should count as property because it has economic value and can be controlled exclusively through private keys and recovery phrases. A private key is the secret code that proves control over Bitcoin, while a recovery phrase is the human-readable backup that can restore access to a wallet. If one person can exclude everyone else from the asset and the asset has market value, that looks a lot like property to a court.

The court accepted that logic. As the ruling put it:

“Current policies deny virtual currencies legal-tender status, but do not deny their property attributes.”

That distinction is the whole ballgame. China does not recognize Bitcoin as legal tender, and crypto trading plus related financial services remain heavily restricted. But when a theft happens, judges still need a way to answer the basic question: what was stolen? If the legal system pretends Bitcoin is nothing, it cannot protect victims when someone steals it. So the courts do the pragmatic thing and treat it as property, without opening the door to a full-blown crypto free-for-all.

The Licang District People’s Court convicted Zhang on April 28, 2025, sentencing him to 10 years and 9 months in prison and imposing a 100,000-yuan fine. The Qingdao Intermediate People’s Court later upheld the ruling on Nov. 10, 2025.

For readers unfamiliar with the process, the Licang court was the trial court, while the Qingdao court acted as the appellate court. In plain terms: one court heard the case first, and the higher court said the verdict stands.

The value problem China had to solve

One of the trickier parts of the case was how to calculate the theft amount. China has no official Bitcoin exchange rate, so the court used the realized cash proceeds instead of trying to invent a state-approved BTC price. That is a practical workaround, and frankly a sensible one. You cannot pretend digital assets do not exist while also pretending they can never be valued.

Using the actual yuan proceeds also keeps the ruling grounded in evidence rather than vibes. Courts do not need speculative fantasies about what 107 BTC “might have been worth” on some random day in some imaginary market. They can rely on what prosecutors proved was converted and traced.

That is especially important in China, where the regulatory stance remains hardline even as the judiciary is forced to deal with the real-world consequences of crypto ownership. The country’s Supreme People’s Court said in May that it would study clearer rules for virtual-currency disputes. Translation: the legal system knows it is dealing with assets that exist whether regulators approve of Bitcoin as property or not.

What this means for Bitcoin holders

This ruling is a win for property rights in a narrow and very specific sense. It does not mean China is relaxing its crypto crackdown. It does not mean Bitcoin suddenly has legal-tender status. It does not mean the state has developed a warm embrace for decentralized money. Let’s not get carried away and start hallucinating a Hong Kong-style crypto renaissance on the mainland.

What it does show is that Chinese courts can still protect ownership rights around Bitcoin when theft occurs. That is important. If a court recognizes that Bitcoin has value, can be controlled, and can be stolen, then victims have at least some legal recourse even inside a hostile regulatory framework.

It also confirms a brutal truth about self-custody: security is not a slogan, it is the whole game. If someone sees your recovery phrase, even for a few seconds, your wallet security can collapse instantly. No exchange support desk, no bank fraud department, and no blockchain magic is going to save you from handing over the master key yourself.

Self-custody means you hold your own coins without a bank or exchange acting as custodian. That gives you freedom, censorship resistance, and control. It also means the margin for error is tiny. One slip, one camera, one sticky note, one “trusted” helper with too much access, and the game is over.

Bitcoin is built to remove middlemen, not to protect people from bad opsec. The protocol is strong. Human beings, as usual, are the weak link.

Key questions and takeaways

Is Bitcoin considered property in China?
Yes, at least in this criminal case. The court accepted that Bitcoin has economic value and can be controlled exclusively, which makes it property-like under Chinese criminal law.

Can someone be convicted for stealing Bitcoin in China?
Yes. Zhang was convicted of theft and sentenced to 10 years and 9 months in prison, plus a 100,000-yuan fine.

How did the thief get access to the wallet?
He memorized the victim’s 12-word recovery phrase after seeing it written down, then reconstructed it later and used it to take control of the wallet.

Why did the court use yuan proceeds instead of a BTC price?
Because China has no official Bitcoin exchange rate. The court used the realized cash value that investigators traced instead.

Does this mean China is relaxing crypto restrictions?
No. Bitcoin still has no legal-tender status in China, and crypto trading and related financial services remain heavily restricted.

What is the biggest lesson for self-custody users?
Never expose your seed phrase or recovery phrase. Brief access can be enough for someone to take over the wallet completely.

What does this case say about crypto regulation in China?
It shows the courts can recognize Bitcoin as property while regulators continue to suppress broader crypto activity. That split is the reality: property disputes get handled, but the state still wants tight control over money flows.

The bottom line is simple: Bitcoin can be protected by law in one lane and crushed by regulation in another. That contradiction may be messy, but it is also revealing. When a court has to decide whether a digital asset can be stolen, Bitcoin’s existence is no longer theoretical. It is property, it is valuable, and if you mishandle the keys, it is gone.