The largest amount of illicit funds ever recovered by federal law enforcement came in the form of bitcoins on a disconnected drive deep in a Georgia man’s laundry closet.
Federal prosecutors announced Monday they had recovered $1.074 billion in bitcoins stashed by a Georgian man for just under a decade. The man in question, James Zhong of Gainesville, Georgia, allegedly pulled off a mass heist on the Silk Road dark web drug market in 2012, but kept the more than 50,000 bitcoins in the hardest place to find. imagine, on a small computer in a “popcorn”. tin” under blankets in his bathroom safe. At the time federal authorities seized the crypto in 2021, it was worth nearly $3.36 billion.
The U.S. Attorney’s Office said that in September 2012, when Silk Road was still the premier way to buy drugs anonymously online, Zhong hatched a scheme to steal what was, at the time, a few hundred thousand dollars in crypto. Prosecutors wrote that the fraudster at the time created nine fake accounts and filled them with between 200 and 2,000 bitcoins, then destroyed the Silk Road system with more than 140 transactions in less than a second, which the led to the release of 51,680 bitcoins, which Zhong then sent to other bitcoins. portfolios he controlled. According to the court documentshe then executed some of this cryptography through a crypto mixer hide where it comes from.
Tyler Hatcher, a special agent with the Criminal Investigations Branch of the Internal Revenue Service, said in the statement that Zhong “attempted to hide his loot through a series of complex transactions that he hoped would be ameliorated by hiding behind the mystery of the ‘darknet.'” US attorney Damian Williams says he used “cryptocurrency tracing and good old-fashioned police work” to find the funds that have been hidden for nearly 10 years. ‘a decade. Although they don’t go into the details of how they conducted the investigation, there have been other investigations that have managed to trace these so-called “anonymous” crypto transactions through wallet transfers and user activity tracking.
Prosecutors charged Zhong with wire fraud, and the man pleaded guilty on November 4. He was released on $310,000 bail the same day, according to court documents. In addition to all of the digital assets seized by federal law enforcement, authorities also took approximately $661,900 in cash and silver and gold bullion from his vault. Zhong was also forced to divest himself of some interests he held in a real estate company.
Of course, at the time bitcoin was still in its infancy. The price of the world’s most popular cryptocurrency hovered between $10 and $11 and closed at $13.45 at the end of this year. This means his theft was just a modest $500,000 in bitcoins which he apparently never unloaded. Since the price of bitcoin has exploded in recent years, and even with the ongoing crypto winter, those few hundred thousand have turned into billions. Another early bitcoin investor, James Howells from the UK, repeatedly tried to recover lost bitcoins from a landfill he mined in the early days of crypto that is worth a lot of money in today’s market.
The wire fraud charges could mean up to 20 years in prison, although Zhong’s sentencing will not be handed down until February. Zhong’s lawyer, Michael Bachner of the New York law firm Bachner and Associates, told Gizmodo in an email “Mr. Zhong is extremely remorseful for his conduct which occurred more than 10 years old when he was only 22. Mr. Zhong returned almost all of the bitcoins he had acquired inappropriately. Ironically, considering the increase in value of bitcoin during the last decade, the value of the bitcoin he returned exponentially exceeded the value of the bitcoin he took.
The federal government said it executed a search warrant at Zhong’s home on November 9 last year, where they found a single on-board computer disconnected from the internet in an underground safe “submerged under blankets in a box of popcorn stored in a bathroom cupboard”. Although he kept the bitcoin in his personal wallets, when the bitcoin was run a hard fork in 2017, which established the new bitcoin as well as Bitcoin Cash, Zhong received an identical amount of the new cryptocurrency, which was among the federal government’s total takeover of crypto assets. According to the statement, Zhong gave away just over 1,000 bitcoins he had access to.
As noted by the U.S. Attorney’s Office in the courtyarddocumentsbecause the founder of Silk Road, Ross Ulbricht was found guilty of exploiting the drug-selling operation in 2015, the feds move the motion that Zhong’s bitcoin is open for seizure after he was involved in UlbrichIt’s a money laundering charge. Although drug trafficking with crypto has been hit hard thanks to the loss of Silk Road, there is other smaller dark web operations as good as great diets still trying to make money with anonymous transactions.
Other crypto heists in recent times have targeted DeFi projects and cross-chain bridges, often racking up thousands or millions of dollars in the process, making Zhong the original of 2012 flight look like a lemonade stand robbery in comparisonat least at the time the fraud was originally committed.