- A Chinese court sentenced a man to nearly 11 years in prison for stealing 107 Bitcoin by memorizing a victim’s wallet recovery phrase.
- Prosecutors successfully argued Bitcoin constitutes legal “property” in China, despite the country’s broad cryptocurrency bans.
- The case underscores that wallet security threats are often human-based, arising from social engineering rather than technical failure.
- Industry experts suggest using 24-word recovery phrases to enhance security against such memorization attacks.
In a landmark case from Qingdao, China, a court has sentenced a man to over a decade in prison for a sophisticated Bitcoin theft executed in July 2023 by memorizing a wallet seed phrase. The perpetrator, identified as Zhang, exploited his role as a trusted helper to steal 107 Bitcoin, later converting them for over $97,000 in proceeds, according to the case summary published by the Supreme People’s Procuratorate.
The victim, Feng, had enlisted Zhang’s help to cash out Bitcoin holdings, presenting a fatal opportunity. While Feng wrote down his 12-word recovery phrase, Zhang managed to memorize 11 words and later deduced the final one.
Consequently, Zhang transferred the massive cryptocurrency haul to his own control. When Feng discovered the theft and reported it, investigators used electronic transaction records to definitively link the crime to Zhang.
Zhang admitted to the transfer but claimed he was merely “protecting” the assets and had not profited. However, prosecutors presented electronic evidence showing he realized significant financial gain from the conversion.
This legal argument proved pivotal, as Chinese prosecutors contended Bitcoin meets the definition of “property” under criminal law. The classification allowed for a severe sentence, including a 100,000 yuan fine (about $14,700), despite China’s series of cryptocurrency bans.
Meanwhile, security experts highlight the human vulnerability exposed by this crime. Alvin Kan, COO at Bitget Wallet, told Cointelegraph that threats are often social rather than technical.
Kan noted that while 12-word phrases are computationally secure, 24-word phrases “raise the ceiling further.” He added that momentary physical exposure during setup remains a critical risk most users overlook.
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