Chinese court jails man 10 years for memorizing seed phrase and stealing 107 Bitcoin

The case began in July 2023 when a Bitcoin holder, identified as Feng, trusted an acquaintance, Zhang, to help convert and manage a transaction involving 117 Bitcoin. Zhang had previously assisted Feng with digital asset handling, which created a sense of trust that ultimately became the entry point for the crime.

Feng wrote down a 12-word wallet recovery phrase while Zhang observed. Prosecutors later said Zhang memorized 11 of the words and even captured the first letter of the final one. By systematically testing possible combinations, he eventually gained access to the wallet and transferred 107 Bitcoin into addresses he controlled.

Trust, opportunity, and a carefully executed wallet breach

At the center of this Bitcoin theft case was a simple but critical security mistake: exposing a recovery phrase in the presence of another person. What seemed like a routine wallet setup became a vulnerability that Zhang allegedly exploited over time.

According to investigators, Zhang did not act immediately. Instead, he relied on memory and trial-and-error methods to reconstruct the final word of the seed phrase. Once access was confirmed, he initiated unauthorized transfers, draining the majority of the wallet’s holdings.

Feng discovered the missing funds the following day and quickly contacted a blockchain security firm before escalating the matter to authorities. “The speed at which the assets were moved across multiple addresses suggests deliberate obfuscation tactics,” noted a

 cybersecurity analyst familiar with similar incidents. “This is a textbook example of how human exposure remains the weakest link in crypto security.”

The Bitcoin theft case highlights how self-custody wallets, while secure in design, can be compromised through social engineering and physical observation rather than technical hacking.

Blockchain evidence and the investigation trail

Once the theft was reported, police launched a formal investigation in October 2023. Authorities traced blockchain transactions, wallet flows, and linked IP addresses to identify Zhang as the primary suspect.

Zhang later admitted to moving the Bitcoin but claimed it was a “protective takeover,” arguing he intended to safeguard the funds rather than steal them. He also stated that he had incurred losses in crypto speculation and had not cashed out the assets.

However, transaction records contradicted his explanation. Investigators found that the stolen Bitcoin had been routed through multiple wallets, with part of the proceeds converted into fiat currency. Over 660,000 yuan (approximately $97,000) was eventually traced to a bank account belonging to a friend.

Legal experts following the Bitcoin theft case noted that the prosecution relied heavily on blockchain forensic evidence. A prosecutor from the Licang District People’s Procuratorate stated, “Current policies deny virtual currencies legal-tender status, but do not deny their property attributes.” This argument became central to the court’s reasoning.

“The ability to demonstrate ownership, transfer control, and assign value through private keys makes crypto functionally equivalent to property under criminal law,” said a legal researcher specializing in digital asset regulation in Asia.

Court ruling defines Bitcoin as property under criminal law

In April 2025, the Licang District People’s Court convicted Zhang of theft and sentenced him to 10 years and nine months in prison, along with a 100,000-yuan fine. The Qingdao Intermediate People’s Court later upheld the verdict in November 2025 after an appeal.

A key legal milestone in this Bitcoin theft case was the court’s explicit recognition of Bitcoin as property. While China maintains strict restrictions on cryptocurrency trading and related financial services, the ruling reinforced that digital assets can still be protected under theft statutes.

Because China does not recognize an official Bitcoin exchange rate, the court calculated the value of the stolen assets based on realized cash proceeds rather than market valuation of all 107 BTC.

“The judgment reflects a pragmatic approach,” explained a regional crypto policy analyst. “Courts are separating regulatory restrictions from criminal protection of ownership rights.”

The Bitcoin theft case also demonstrates how Chinese courts are increasingly willing to treat crypto-related disputes as matters of property rights, even while broader trading bans remain in place.

Legal impact and wider crypto security lessons

The ruling does not signal a shift in China’s overall crypto stance. Bitcoin remains without legal-tender status, and crypto trading continues to fall under strict regulatory control. However, local courts have repeatedly handled cases involving digital asset theft, ownership disputes, and recovery claims.

As previously reported in broader judicial discussions, China’s Supreme People’s Court has indicated interest in refining rules for virtual-currency-related cases, suggesting more clarity may emerge in the future.

This Bitcoin theft case underscores a critical lesson for global crypto users: security breaches often stem from human error rather than system failure. A single exposed recovery phrase can grant full access to a wallet, making operational discipline as important as technical safeguards.

Industry experts warn that as digital asset adoption grows, similar incidents may become more frequent unless user education and custody practices improve significantly.

Ultimately, the Bitcoin theft case stands as both a legal milestone and a cautionary tale—highlighting how courts, criminals, and crypto users are still adapting to the realities of decentralized finance in an evolving regulatory landscape.