A court in Qingdao, China, has sentenced a man surnamed Zhang to 10 years and nine months in prison for stealing 107 Bitcoins from an acquaintance’s wallet after memorizing most of the recovery phrase, China’s Supreme People’s Procuratorate disclosed.
The Licang District People’s Court also imposed a fine of 100,000 yuan (roughly $13,800) on Zhang, who sold the stolen cryptocurrency for 660,000 yuan (about $91,000). An appeal to the Qingdao Intermediate People’s Court failed, with judges upholding the original verdict in November 2025.
How was Zhang able to steal 107 Bitcoins?
Zhang, a Shandong resident, built trust with the victim, Feng, over a period of regular cryptocurrency transactions. Zhang was able to convince Feng to move his holdings to a different digital wallet.
Digital cryptocurrency wallets usually generate a recovery phrase from 12 words, which are drawn randomly from a standardized list of 2,048 English terms. That phrase functions as the master key to all assets inside the wallet.
While Feng wrote down the new phrase, Zhang watched closely enough to commit 11 of the 12 words to memory and noted the first letter of the remaining word, according to the Supreme People’s Procuratorate’s case disclosure.
Later that night, he worked through the possible combinations until he cracked the full sequence, logged in to Feng’s wallet, and transferred all 107 Bitcoins in multiple transactions.
Feng discovered the missing coins the next day when he attempted a transaction.
At first, he thought he had been hacked and reached out to a blockchain security firm whose analysts concluded the funds had likely been stolen by someone with access to the wallet credentials.
Zhang’s claim of “protective takeover” is rejected
The police traced the wallet activity to Zhang through IP address analysis, after which he admitted to taking the Bitcoin. However, he claimed that he had done so to prevent hackers from compromising Feng’s funds, a defense he reportedly termed a “protective takeover.”
Prosecutors dismantled Zhang’s claim by mapping the money trail. Transaction records showed that Zhang had moved the stolen Bitcoin through multiple exchange platforms.
He also converted the proceeds to 660,000 yuan in fiat currency and funneled the cash through third-party bank accounts, the Shandong Legal Daily reported.
The stolen coins were worth around 22.54 million yuan ($3.1 million) at market prices on the day of the theft; however, prosecutors pegged the criminal amount to the 660,000 yuan Zhang actually pocketed from selling them.
Legal observers are reportedly viewing this valuation method as a potential template for future cryptocurrency theft prosecutions in China.
Bitcoin classified as property under criminal law
The case turned on whether Bitcoin qualifies as “property” under China’s criminal code. Beijing banned cryptocurrency trading and mining in 2021, and the government does not recognize any digital token as legal tender.
Prosecutors in Licang argued that Bitcoin meets the legal definition of property because acquiring it requires expenditure of computing power and capital, it carries measurable economic value, and owners can exercise exclusive control through private keys and seed phrases. The court agreed, convicting Zhang of theft.
For Qingdao prosecutors, recognizing Bitcoin as property for criminal-law purposes does not legitimize it as a financial instrument or relax the trading ban.
Pattern of seed-phrase theft cases in China
The Qingdao case follows another Chinese conviction disclosed in May. Cryptopolitan reported that a court in Fuzhou sentenced a man identified as Lin to 12 years and seven months for stealing four Bitcoins from an acquaintance who had hired him to liquidate the holdings.
Lin copied the private keys from the victim’s laptop and hardware wallet, sold the coins for about 900,000 yuan, and went undetected for nearly four years.
In both cases, a trusted associate exploited physical or visual access to wallet credentials. Cold storage tends to come up as a more secure alternative for storing Bitcoin as they protect against remote attacks; however, they do not provide any defense when the person standing next to you is the threat.
The Supreme People’s Procuratorate flagged the Zhang case as a “new type of virtual currency theft,” signaling that national-level prosecutors view seed-phrase theft as a distinct and growing category of crime.
Whether lower courts across China adopt the Qingdao valuation method (actual sale proceeds rather than market price) will shape sentencing in future cases.
