In the world of Crypto Assets, an event that occurred in March 2024 attracted widespread attention. An investor using the pseudonym Li Ming encountered what is known as a "flash loan attack" on Uniswap, which not only caused him significant losses but also exposed legal loopholes in the Decentralized Finance (DeFi) sector.

The course of this incident is typical: Li Ming saw that the SDT token was listed, and the liquidity pool showed 100,000 USDT. He quickly invested 50,000 USDT, but within just 24 seconds, he witnessed the liquidity being drained, and the token's value dropped to zero. When he tried to redeem, he only received a mere 21.6 USDT.

This operational model has sparked serious legal discussions. Does the behavior of the project party constitute fraud? Or should it be regarded as a normal market risk? The first-instance court sentenced the principal offender to four and a half years in prison and imposed a fine for the crime of fraud. However, in the second instance, the defense raised the argument that "platform rules allow for withdrawal from liquidity pools," pushing the case into a legal gray area.

This "flash harvesting" technique typically involves several steps: first, injecting false liquidity when launching on a decentralized exchange, using bots to create fake trading volume to attract retail investors; second, reserving backdoors in the smart contract, such as retaining the authority to mint additional tokens or adjust transaction fees; finally, generating momentum through social media to create expectations of "getting rich quick."

This case highlights the significant challenges faced by the DeFi world: how to protect investors in a decentralized and permissionless environment? How to define the legal boundaries of smart contract operations? How do regulatory agencies adapt to the challenges posed by this new technology?

With the continuous development of Crypto Assets and Decentralized Finance, similar legal disputes may become increasingly common. Regulatory bodies, legal experts, and industry participants need to work together to establish a legal framework that adapts to this emerging field. At the same time, investors also need to remain vigilant and understand the potential risks of DeFi investments.

The final judgment of this case may have a profound impact on the entire Crypto Assets industry, redefining the rules of the game for Decentralized Finance. Regardless of the outcome, it will become an important case for exploring the intersection of code, law, and financial innovation.