Chinese Prosecutors Charge Five Men With Fraud in 1.2 Million Yuan USDT Bait Case

A Cash Deal That Never Paid

The offer was 1.2 million yuan in banknotes for a batch of USDT, counted and handed over in person. The cash never moved. On March 23, a seller surnamed Xiao met five men led by a buyer surnamed Wang on the second floor of a shop in Xuzhou, in China's Jiangsu province, to settle an over-the-counter trade in Tether (USDT), the dollar-pegged stablecoin that dominates informal crypto settlement in the mainland even though trading it there is banned. The USDT price held its dollar peg through the period, so the coins Xiao agreed to sell carried a value of roughly 1.2 million yuan.

Wang was not a new face to Xiao. He had bought USDT from the seller twice earlier this year, paying cash on both occasions, and the two had completed prior deals without incident. After he learned that USDT trading is illegal in China, he decided to take the seller's coins without paying, and recruited a man surnamed Xu and other accomplices. The group scouted the shop and its stairwell in advance, agreed on roles, then proposed one more cash purchase at the same venue.

Xu arrived with the full 1.2 million yuan. Xiao counted the banknotes, then transferred the corresponding amount of USDT to a receiving wallet Wang had designated. Xu called Wang at once to confirm, and Wang said the coins had not arrived. While Xiao stepped away to check the transfer records, Xu carried the bag of cash to the window and dropped it out of the building. Accomplices waiting below picked it up and drove off. When Xiao moved to chase them, a man surnamed Zhang and others who had been hiding in an adjacent room came out and blocked his path. Xiao called the police, and the scheme surfaced from there.

From Snatch to Fraud

Police transferred the case to the Pei County procuratorate for prosecution review in June, filing it at first on suspicion of snatch, the offence that covers the open taking of property from a victim's grasp. Prosecutors then pulled dashcam footage and on-site surveillance, arranged a forensic examination of the suspects' phones and ran supplementary interrogations. The material led them to a narrow conclusion: the 1.2 million yuan stayed under Wang's control from the first moment to the last, so it was a prop built to win trust rather than property seized by force. The asset actually lost was the USDT Xiao had already sent, and the indictment was filed as fraud on that basis. Snatch requires property taken from a victim's possession; on this record, nothing was.

The defense argued at trial for a different label: contract fraud, a separate offence covering deception in the signing or performance of a contract, and one that carries a visibly different sentencing range. Prosecutors rejected that frame. Contract fraud exists to protect market order, they argued, and virtual currency trading was designated an illegal financial activity by a notice the People's Bank of China and other departments issued in September 2021, which places a banned trade outside that offence's reach. The same 2021 notice is the reason Xiao's own sale was an off-book deal in the first place. The full account of the case was published on Oct 29 in the official case record. The hearing ran for more than three hours and was observed in person by a review panel from the Supreme People's Procuratorate. Of the five defendants, only Zhang kept a single consistent account; Wang and the others revised their statements repeatedly. The court will hand down its verdict on a date it has yet to set.

A Banned Asset Is Still Property

The premise behind the plot, that a banned asset cannot be stolen, did not survive the indictment. Prosecutors treated the transferred coins as property whose loss was complete the moment Xiao sent them: control follows the private key, and the receiving address, not the cash on the table, marked where the value ended up. The case lands in a market that still runs on informal rails. Tether, the issuer of USDT, reported $7.95 billion in excess reserves in its Q3 attestation, and the token remains the settlement rail of choice for gray-market trades, which is why loss cases keep surfacing: a 15.99M USDT exchange breach in India, fake sites impersonating Korean brands built to collect USDT, and a pledge to repay 400,000 USDT taken from 29 wallets. The pending verdict will show how heavily China prices a bait-and-switch built on its own crypto ban.