The U.S. Department of Justice has sized $3.36 billion in bitcoin and has obtained a conviction against a man who stole bitcoin from the infamous dark web marketplace Silk Road before it was shut down in 2013.
James Zhong from Gainesville, Georgia was alleged to have stolen approximately 50,000 bitcoin from Silk Road in September 2012. According to the Justice Department, Zhong defrauded Silk Road of its funds by creating nine Silk Road accounts and then triggering over 140 transactions in rapid succession to trick Silk Road’s withdrawal-processing system into releasing 50,000 bitcoin to his accounts. Upon obtaining the bitcoin, Zhong is then alleged to have transferred the funds to separate addresses to prevent detection, conceal his identity and ownership, and obfuscate the bitcoins’ source.
Having stolen the funds, Zhong received a matching amount of Bitcoin Cash in August 2017 when bitcoin split into two cryptocurrencies, leaving him holding 50,000 in both bitcoin and Bitcoin Cash. He is then alleged to have traded his Bitcoin Cash holding for 3,500 bitcoin, giving him a total of 53,500 bitcoin in total crime proceeds.
The feds finally caught up with Zhong in November 2021 with a search warrant resulting in the recovery of just over 50,000 bitcoin. Where federal agents found the bitcoin is colorful – the bitcoin was found in wallets hidden in an underground floor safe and a “single-board computer” that was submerged under blankets in a popcorn tin stored in a bathroom closet. Authorities also seized $661,900 in cash, 25 Casascius coins worth 175 bitcoin and gold and silver bars. Following his arrest, Zhong volunteered a further 1,004 bitcoins that had not previously been seized.
Not much is known about Zhong before his arrest, however, there is some speculation that he may have been a known figure in the bitcoin community in the mid-2010s. The Block reports that Zhong may have been “Loaded,” an online persona who described himself as a “bitcoin million, broker and asset manager” who made 135 posts on BitcoinTalk between November 2012 and March 2017. Wallets related to “Loaded” were highlighted in the Justice Department release.
“For almost ten years, the whereabouts of this massive chunk of missing bitcoin had ballooned into an over $3.3 billion mystery,” U.S. Attorney Damian Williams said in a statement. “Thanks to state-of-the-art cryptocurrency tracing and good old-fashioned police work, law enforcement located and recovered this impressive cache of crime proceeds. This case shows that we won’t stop following the money, no matter how expertly hidden, even to a circuit board in the bottom of a popcorn tin.”
Zhong pleaded guilty to one count of wire fraud which has a maximum sentence of 20 years in prison as part of a plea deal. He also agreed to a consent order for forfeiture of property, including an 80% stake in a Memphis real estate company, his bitcoin holdings and other items.
Zhong’s sentencing hearing is scheduled for Feb. 22.
Image: Dragoyx/Wikimedia Commons
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