The YesCoin incident is not only a business dispute triggered by uneven internal profit distribution but also a legal disaster caused by a lack of legal compliance management.
Written by: Shao Jiadian
Recently, the YesCoin incident has caused a stir throughout the entire cryptocurrency ecosystem. As a lawyer who has long focused on Web3 entrepreneurship and compliance, I believe this event not only exposes the internal governance flaws of certain projects but also reflects the widespread legal compliance blind spots in the current Web3 field.
This article will provide a comprehensive analysis and interpretation from four aspects: event review, common legal issues in Web3 projects, analysis of criminal issues, and lawyer recommendations, hoping to provide references and insights for entrepreneurs, investors, and practitioners in the industry.
Event Review: From Business Dispute to Criminal Case
(1) The Course of Events
According to multiple media reports, YesCoin once gained immense popularity within the TON ecosystem last year due to its scale of millions of users. However, recently, due to internal disputes between founder Zhang Chi (also known as Zoroo) and partner Wang Mouxin (commonly referred to as "Old Wang"), internal conflicts within the project intensified. Initially, the two parties had disagreements over project control, capital investment, and equity distribution. According to public information, Zhang Chi unilaterally removed some permissions from Wang Mouxin's team during the internal dispute, leading to subsequent more intense confrontations. Ultimately, the incident quickly escalated into a legal case—Zhang Chi was arrested by the police in Hangzhou on February 12, 2025, on suspicion of "illegally obtaining data from a computer information system," and was subsequently taken to Shanghai for investigation the next day.
(2) The Deeper Causes Behind the Incident
On the surface, this dispute appears to be merely an internal business conflict, but in reality, it hides deeper governance issues and legal risks. The focus of the dispute is not only on the project's business model, profit distribution, and technical management but also involves a series of legal issues such as corporate governance, contractual agreements, and equity structure. Especially in the early stages of entrepreneurship, teams often lack formal legal documents and clear equity arrangements, relying solely on verbal commitments for cooperation. This can easily lead to conflicts of interest and management chaos as the project rapidly develops and capital continuously flows in, resulting in legal disputes or even criminal cases.
Common Issues in Early Web3 Projects: Governance Defects and Compliance Risks
(1) The Conflict Between Decentralization and Legal Compliance
A core concept of Web3 projects is decentralization, which seeks to create a self-organizing ecosystem that does not rely on traditional centralized management models. However, the concept of decentralization often faces the issue of "partners collaborating without clear definitions of rights and responsibilities" in practice. Many projects, in pursuit of speed and flexibility during their early stages, neglect the standardized construction of internal governance and fail to establish clear equity distribution, decision-making mechanisms, and legal contracts in a timely manner. Such management loopholes often become apparent when projects encounter funding issues, profit distribution conflicts, or even struggles for control.
(2) Unclear Capital Investment and Equity Arrangements
In the YesCoin project, public information indicates that early team members participated in investment primarily through "human capital" contributions, and a significant amount of internal funds did not flow through formal company structures but relied on verbal agreements and internal arrangements. While this model can reduce management costs and promote rapid project initiation in the short term, once the project scales up, the competition for funds and interests will inevitably intensify internal conflicts, potentially evolving into legal disputes. As seen in many industry cases, teams lacking formal legal documents and equity agreements often face significant disputes over profit distribution and decision-making authority, even leading to criminal cases.
(3) Abuse of Internal Technical Control
Another issue worth noting is that the control over technology and data often becomes the focal point of contention. For Web3 projects, control over core systems, user data, and operational platform data is a crucial asset for project operation. Once control is concentrated in one party's hands, it may be abused. In the YesCoin incident, Zhang Chi unilaterally deprived the partner team of access to data using technical means, thus gaining an advantage in the struggle for project control. This not only raises serious ethical concerns but also violates national laws regarding data security and computer information system management.
The Focus of the Case Escalating to a Criminal Case: Illegal Acquisition of Computer Information System Data
(1) Interpretation of the Charge
According to relevant provisions of China's Criminal Law, "illegal acquisition of computer information system data" primarily targets behaviors that violate national regulations, intrude into unauthorized computer information systems, or use other technical means to obtain data stored, processed, or transmitted in the system. Specifically, this crime is divided into "serious" and "particularly serious" categories, with clear sentencing standards for illegal acts and the economic losses and social impacts they cause. Media reports indicate that Zhang Chi is suspected of using his control over system permissions to illegally remove the partner team's data accounts during the internal dispute, which has been preliminarily identified as an illegal data acquisition act.
(2) Risk Definition in Practice
In practical operations, determining whether the act constitutes "illegal acquisition of computer information system data" mainly considers the following aspects:
The quantity and type of data obtained: For example, whether key identity authentication information related to payment settlement, securities trading, etc., was obtained, or whether a large amount of sensitive data was involved.
Illegal gains and economic losses: If the illegal gains exceed a certain standard or cause significant economic losses to the other party, the sentencing standards will be correspondingly increased.
Subjective malice and purpose of the act: In business disputes, if one party uses technical means to seize project control, their actions may not only be a commercial dispute but also exhibit clear illegality and intent to infringe.
In the YesCoin incident, due to the failure of both parties to clarify their rights and obligations through formal contracts and equity agreements in the early stages of the project, Zhang Chi took unilateral technical measures based on his control over system data, leading to the escalation of the dispute. From the perspective of civil and commercial disputes, such behavior easily touches the criminal red line and becomes a basis for legal accountability.
Lawyer Recommendations: Three Essentials for Web3 Entrepreneurship
Based on the above analysis, Mankun Lawyers offer several suggestions for Web3 entrepreneurs:
(1) Sign Written Contracts and Agreements: Clarify Rights and Responsibilities
The YesCoin incident illustrates that many Web3 projects in their early stages overly rely on trust and verbal commitments among team members, neglecting the signing of written contracts. While the enthusiasm and passion of the founding team are important in the early stages, once significant funds and external investments are involved, it is essential to sign detailed and rigorous legal documents in advance to clarify the rights and responsibilities of all parties, avoiding subsequent disputes based on empty promises. Specific agreements and documents include:
Partnership agreements and financing agreements: Whether it is a partnership agreement among founders or financing contracts with external investors, they must be drafted or reviewed by professional lawyers to ensure that every clause has legal effect.
Equity incentive and profit distribution mechanism agreements: Clearly define the contributions and entitlements of all parties in the early stages of the project to avoid leaving future issues due to "verbal commitments."
Technical and data usage rights agreements: For parts involving core data and systems of the project, strict technical agreements should be established to clarify the usage rights, maintenance responsibilities, and liability for breach of contract of all parties.
(2) Build a Sound Legal Entity: Ensure Risk Isolation and Rights Protection
For Web3 projects, establishing a sound and scientific legal entity is particularly crucial. A well-structured Web3 project should generally include the following legal entities:
1. Development Laboratory Company
The development laboratory company is the core of the blockchain project, responsible for key aspects such as research and development, testing, and deployment, managing the team and paying salaries. This type of company typically has a professional technical team, including software engineers and blockchain experts, and will be responsible for the development and maintenance of blockchain technology to ensure the smooth progress of the project.
2. Product and Token Distribution Company
The product and token distribution company serves as a bridge connecting the blockchain project to the market, responsible for marketing, sales, customer service, and other tasks. This type of company usually collaborates with cryptocurrency exchanges, launchpads, and other platforms to bring tokens to market and provide trading services for investors. Common choices include offshore locations such as the British Virgin Islands (BVI), the Cayman Islands, or onshore locations such as Singapore and Hong Kong.
3. DAO Company
The DAO company provides legal protection and participation in decentralized governance for DAO members, protecting them from judicial, tax, financial, and other liabilities. This type of company is responsible for the registration of the DAO, member management, fund management, and other tasks. This helps achieve decentralized autonomy for the DAO while ensuring compliance. Additionally, establishing a sound fund management system and risk management mechanism to ensure the safety and compliant operation of DAO funds is also an essential responsibility of the DAO company.
(3) Timely Establish Intellectual Property Rights: Prevent Theft and Plagiarism of Technological Achievements
In the YesCoin incident, the lack of intellectual property protection may have been a neglected but crucial factor. If the technological achievements of the entrepreneurial project do not have clear ownership and usage rights agreements, internal conflicts within the team can easily lead to disputes over technological achievements. Such disputes not only exacerbate conflicts among team members but may also result in the leakage and misuse of technological achievements, thereby harming the interests of the entire project.
Mankun Lawyers recommend constructing an intellectual property protection system for Web3 projects from the following aspects:
1. Timely Intellectual Property Rights Confirmation
Intellectual property rights confirmation is the foundation for protecting technological achievements. Entrepreneurial teams should proactively apply for various types of intellectual property protection and ensure the timeliness and accuracy of the confirmation process. This includes sorting and categorizing all technological achievements, brand identifiers, trade secrets, etc., involved in the project, clarifying which achievements can be protected through patents, copyrights, trademarks, and which need to be maintained through trade secret protection measures. For example, for the underlying architecture and core algorithms of blockchain projects, consideration can be given to applying for patents; for the project's user interface design, documentation, etc., copyright registration can be pursued; for the project's brand names and logos, timely trademark registration should be conducted.
2. Sign Intellectual Property Ownership Agreements
To avoid disputes arising from intellectual property ownership issues within the team, entrepreneurial teams should sign clear intellectual property ownership agreements. The agreements should detail the ownership of various technological achievements, documents, etc., created by team members in the project, specifying which achievements are collectively owned by the team, which belong to specific members, and how to handle intellectual property upon team dissolution or member exit.
Mankun Lawyers' Summary
The YesCoin incident has sounded the alarm for the entire Web3 ecosystem. It is not only a business dispute triggered by uneven internal profit distribution but also a legal disaster caused by a lack of legal compliance management. In this emerging market filled with opportunities and challenges, the importance of legal risk prevention cannot be overlooked. Entrepreneurs should take this as a lesson and establish a rigorous legal framework and governance system from the very beginning to eliminate disputes arising from management loopholes and ensure the long-term development of the project. It is hoped that this article can provide profound insights and practical advice for Web3 entrepreneurs and practitioners, promoting the blockchain industry towards a healthier, more transparent, and regulated future.
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