Silk Road Hacker Pleads Guilty to Stealing 50K+ Bitcoin Worth $3.36B, Faces 20 Years in Prison – Spiceworks

On Monday, the U.S. Department of Justice announced the seizure of 50,676 Bitcoin worth approximately $3.36 billion when law enforcement conducted the raid in November 2021. The disclosure came after James Zhong pleaded guilty to wire fraud he committed a decade ago.

The DoJ said that Zhong had illicitly obtained more than 50,676.17 Bitcoin in 2012, which he had stashed away on a single-board computer in the basement of his home in Gainesville, Georgia. Evidently, Zhong had obtained the cryptocurrency from the now-defunct but then thriving dark web marketplace Silk Road.

DoJ’s press release discloses the extent to which Zhong went to conceal his crimes. The single-board computer (usually the size of a few inches) was placed in a popcorn tin placed in the underground bathroom.

Besides the Bitcoin, law enforcement also recovered $661,900 in cash, 25 Casascius coins (physical bitcoin) (valued ~174 Bitcoin), 11.116 additional Bitcoin, and precious metals, including four one-ounce silver-colored bars, three one-ounce gold-colored bars, four 10-ounce silver-colored bars, and one gold-colored coin.

For perspective, Bitcoin was valued at approximately $10 in September 2012, valuing his heist at $506,760. It was valued at $3.36 billion when it was seized in November 2021 and is currently valued at just under $1 billion.

See More: Former Apple Employee Admits to Defrauding Cupertino And IRS Out of $18.8M

In 2012, Silk Road became the go-to online marketplace for drugs and other illegal, unethical goods, where Bitcoin was the accepted mode of payment. It was shut down in 2013 while its administrator Ross Ulbricht was arrested and sentenced to two life imprisonments + 40 years.

When Silk Road was shut down, Bitcoin worth billions of USD went missing. The $3.36 billion bust of Zhong clears up some of the mystery.

According to the DoJ, Zhong exploited a vulnerability in Silk Road’s payment system. “Zhong funded the Fraud Accounts with an initial deposit of between 200 and 2,000 Bitcoin. After the initial deposit, Zhong then quickly executed a series of withdrawals. Through his scheme to defraud, Zhong was able to withdraw many times more Bitcoin out of Silk Road than he had deposited in the first instance,” the DoJ explainedOpens a new window .

“As an example, on September 19, 2012, Zhong deposited 500 Bitcoin into a Silk Road wallet. Less than five seconds after making the initial deposit, Zhong executed five withdrawals of 500 Bitcoin in rapid succession — i.e., within the same second — resulting in a net gain of 2,000 Bitcoin.” Zhong triggered more than 140 transactions in rapid succession to trick Silk Road and take home approximately 50,000 Bitcoin.

Tyler Hatcher, Criminal Investigation special agent in charge, Internal Revenue Service, added that Zhong hoped to conceal his misdeeds through a series of complex transactions over the darknet.

The value of the bust made it the biggest financial seizure by U.S. law enforcement in November 2021 and the second-biggest ever, trailing the seizure of $3.6 billion worth of Bitcoin from a New York couple, Ilya Lichtenstein and Heather Morgan in February 2022, which they stole in the 2016 Bitfinex crypto exchange hack.

Zhong faces a 20-year prison sentence for wire fraud.

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