Bitcoin: Thief convicted in China for memorizing a seed phrase

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In July 2023, Mr. Feng wants to convert 117 bitcoins and asks Mr. Zhang, who has already helped him carry out similar operations. While setting up the wallet, Mr. Feng writes down the twelve words of his recovery phrase. Mr. Zhang, present at his side, memorizes eleven of them. He then pieces together the full sentence and uses it to access the wallet and transfer 107 bitcoins.

Mr. Feng reports the funds missing. Investigators trace the transactions and link them to the Zhang in question, who admits to moving the bitcoins. However, he claims to have wanted to protect the assets and says he subsequently lost money by speculating. Prosecutors counter his version with electronic records that they say show he made more than $97,000 from his conversions. This figure corresponds to the sums collected according to the accusation, while the 107 BTC designates the quantity stolen.

China has imposed restrictions on activities related to cryptocurrencies, including their trading and mining. In this case, prosecutors had to determine whether bitcoins held by an individual could be classified as property to establish the offense of theft. They retained this qualification in their argument.

The file illustrates the distinction between the rules governing activities related to cryptocurrencies and the criminal classification of the theft of assets held by a third party. In Qingdao, it was on this second ground that the prosecution pursued Zhang and the court pronounced his conviction.

A recovery phrase allows you to restore a wallet on another device and regain access to funds. A person who knows this phrase can therefore use it regardless of the original device. In Mr. Feng's case, the decisive moment is when he writes down the words in the presence of the person who has come to help him.

Interviewed by Cointelegraph, Alvin Kan, director of operations at Bitget Wallet, emphasizes that this risk exists even when the exposure lasts only an instant. An acquaintance can explain how to install the application or verify a transfer. The generation and saving of the sentence can be done privately.

An editorial article. Le Journal du Coin, the first French-speaking news media on cryptocurrency, Bitcoin, and blockchain protocols.

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Machine-translated from French