China sentences virtual currency extorter to prison

A man beat up a fellow Internet cafe user to obtain virtual items that would improve his performance in online games

A Chinese man who extorted virtual items and currency from a fellow Internet cafe user to improve his performance in online games was sentenced over the weekend, local media said.

With three friends, the man beat up the victim and forced him to turn over virtual currency worth 100,000 yuan (US$14,700), China's official Xinhua news agency reported late Sunday.

The attackers also extorted virtual equipment for online games from the victim, local media said. The men were each fined and the main attacker sentenced to three years in prison by a court in northeastern Liaoning province.

Selling in-game weapons, armor and other items to players for real-world cash is a common way for China's online gaming companies to a turn a profit. Internet cafes in China are often packed with chain-smoking teenagers who play World of Warcraft or similar Chinese games for long hours.

But many online services outside of gaming have also started trying to make money and retain users by selling virtual items, or virtual currency used to buy those items, said Benjamin Joffe, CEO of Internet research firm Plus Eight Star. Many companies have struggled with ad-based revenue models for the online communities they operate, Joffe said.

The virtual currency stolen in the recent case was QQ coins, sold by Chinese Web portal Tencent. Users can spend QQ coins to buy items in online games and pay for other services, including those in Tencent's massively popular chat client, QQ. QQ had 377 million active users at the end of last year, according to Tencent's annual report.

Users often store extra QQ coins or other virtual currency in online accounts, sometimes after using only some of the currency bought with a prepaid card. QQ coins and most other types of virtual currency can not be converted back into real cash. There could be anywhere between a few hundred million and one billion dollars in unspent QQ coins in circulation, Joffe estimated.

No law in China currently grants protection to virtual property, Xinhua said. But the court ruled that it should be protected in this case since the victim had spent time and money to acquire it, the report said.

Chinese courts have been hesitant to set a legal precedent by ruling in such cases, Joffe said. How virtual property should be handled in court cases remains under discussion in the U.S. and Europe as well, he said.

China's developed online gaming culture has made virtual currency particularly popular there, but the concept has also caught on in Silicon Valley, said Joffe. Facebook users, for instance, can charge a credit card to buy each other digital gifts.

"What's important is not that this is happening in China," Joffe said. "It's actually a pretty good idea, and it's spreading worldwide."

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