In a recent hearing, a judicial court in China ruled out a judgment against a man accused of stealing non-fungible tokens (NFTs). The Hangzhou court has ordered the defendant’s imprisonment, suspension, and penalty for stealing NFT collections.
According to local media reports, the Gongshu District Procuratorate of Hangzhou City, Zhejiang Province, filed a public prosecution a few days ago. The defendant Chen was sentenced to three years in jail, suspended for four years and six months, and fined 7,000 yuan by the court.
Sources reveal that it all started on July 20, 2022, when Chen unintentionally uncovered a flaw in the login procedure of a specific digital collecting platform. Exploiting the flaw in the login system, Chen successfully entered into the accounts of over 30 people and sold respective NFT collections of about 21 of them for a unit price ranging from 1,400 to 1,600 Yuan, yielding a profit of over 30,000 Yuan ($4,361.48).
One of the people to have lost their collection was Mr. Wang from Hangzhou who is a player in the digital collection. He paid around 299 Yuan in July last year to acquire a digital collection on an internet site. Over a period the value of this digital collection swiftly increased because of restricted sales and this made Wang happy.
However, when Wang returned to the platform in the early hours of July 22, he noticed that his digital collection had vanished. Then the account records revealed that the collection was resold to other users, although he did not undertake any activities himself. Following this, Wang quickly informed me of the issue in the WeChat group of digital collectable users due to the incident’s fast occurrence.
Surprisingly, more than ten individuals reported having had the same problem. This heightened the network platform’s alertness, and platform experts promptly analyzed the server logs to see if there was any aberration in the database. The findings revealed that more than 30 user accounts were logged into the same IP address at the time, and 21 consumers’ digital collections were sequentially resold.
When the online platform was made aware of this unusual situation, it assumed that someone secretly entered into the accounts of users to execute criminal activities. Then the technicians performed a reverse check and discovered that the IP had also been entered into an account whose genuine name was validated as Chen.
To know more, the online platform checked the matter with the third-party platform that was responsible for the resale. The records revealed that the account registration information for the sale of the missing 21 NFT collections matched Chen’s personal information.
Following that the network platform alerted the police and Chen was detained. These 21 collections have now been restored to the original user account.
Due to China’s strict ban on cryptocurrencies, most NFTs in the country are referred to as digital collectibles and can only be purchased using legal cash, often Yuan. For years, the national government has consistently clamped down on blockchain-based assets, seeing crypto as a danger to financial stability but has been reasonably favorable towards NFTs.
In December, a Chinese court stated that NFT collections are online property that must be protected under the country’s law. This statement from the court brought relief to many who were confused regarding the legal status of NFT. Right after that, news of authorities’ plans to launch the first state-backed non-fungible token (NFT) marketplace also spurt.
However, a sudden surge in thefts and complaints involving NFTs has been observed. As per data, customer complaints against NFTs in China increased 300-fold in 2022, indicating an issue that is becoming more difficult to manage. Now, this increase is significantly concerning as the NFT marketplace is expected to exponentially grow in the years ahead.