A crook who stole more than 50,000 Bitcoins from the dark web souk Silk Road in 2012 has pleaded guilty and lost the lot, with a stretch behind bars likely ahead of him.
James Zhong, 32, admitted committing wire fraud in September 2012 by creating nine Silk Road accounts he used to trigger "over 140 transactions in rapid succession in order to trick Silk Road's withdrawal-processing system," the US Department of Justice said Monday. Portable Lock Box
That stunt, we're told, netted Zhong "approximately 51,680.32473733 Bitcoins", which was worth over $3.6 billion (£3.1 billion) when seized by Feds last year. As of writing, the amount is worth a little more than $1 billion (£867 million), due to the depressed digicash market. It sounds as though Zhong abused a design flaw in Silk Road to have funds held by the marketplace released to him, which he then laundered through various wallets in an attempt to conceal his identity.
Along with recovering all that Bitcoin from Zhong, the DoJ said it also seized 25 physical Casascius coins worth 174 Bitcoin, around $661,900 (£573,834) in cash, some bars of precious metals, as well as Zhong's 80 percent holding in a real estate company called RE&D Investments.
The DoJ noted that it found Zhong's holdings "in an underground floor safe; and on a single-board computer that was submerged under blankets in a popcorn tin stored in a bathroom closet" when it raided his home in November 2021.
Zhong, of Gainesville, Georgia, and Athens, Georgia, pleaded guilty last week to the wire fraud charge, which carries a maximum penalty of 20 years in prison. His sentencing is scheduled for February next year.
"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," said US Attorney Damian Williams.
Zhong, the DoJ pointed out, never bought or sold anything on Silk Road – he just took the cyber-crime hub for an exorbitant amount of digital currency.
Ross Ulbricht, the mastermind behind the Silk Road, was sentenced to life in prison without parole in 2015 based on crimes including drug trafficking, money laundering, computer crime and engaging in a criminal enterprise. Ulbricht was also charged with multiple cases of murder-for-hire, but those charges were later dropped.
The seizure of the 50k Bitcoin from Zhong in 2021 was, at the time, the largest cryptocurrency and financial seizure in the history of the DoJ, but has since slipped to second place in both of those categories thanks to the Bitfinex robbery earlier this year.
To cybercriminals still hiding behind the "anonymity" of crypto currency, IRS Criminal Investigations Special Agent In Charge Tyler Hatcher seemed to state that anonymity wasn't worth relying on.
"IRS-CI Special Agents are the best in the world at following the money through cyberspace or wherever our financial investigations lead us," Hatcher said. "We will continue to … track down these criminals and bring them to justice." ®
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