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- US Attorney's Office announced a historic $3.36 billion cryptocurrency seizure.
- The US Justice Department reported that James Zhong pled guilty to stealing cryptocurrency from the darknet marketplace Silk Road.
- Zhong stole more than 50,000 BTC by clogging Silk Road's transaction processing system.
On November 7, the United States Department of Justice (DOJ) announced that James Zhong pled guilty on Friday to commit wire fraud in September 2012.
In which, he illegally obtained over 50,000 bitcoin from the Silk Road dark web internet marketplace. The Justice Department also announced a "record $3.36 billion cryptocurrency seizure" in connection with the case.
On Nov. 9, 2021, government officials raided Zhong's house in Gainesville, Georgia, and "seized approximately 50,676.17851897 Bitcoin, then valued at over $3.36 billion," according to the DOJ.
This was the largest cryptocurrency seizure in the history of the United States Department of Justice, and it is still the department's second-largest financial seizure.
Silk Road Crypto Haul
Silk Road was an online darknet marketplace founded by accused criminal Ross Ulbricht. Between 2011 and 2013, it traded illegal goods in exchange for Bitcoin. Ulbricht was found guilty by a unanimous jury in 2015 and sentenced to life in prison. Since then, authorities have cracked down on at least two incidents of Silk Road theft, the most recent being Zhong's.
Authorities uncovered crypto keys for only 174,000 BTC (approximately $105 million) of the 614,000 BTC commissions made during Silk Road's two-year operation when they arrested Ulbricht in a San Francisco library.
In November 2020, the crypto forensics firm Elliptic discovered that someone had transferred 70,000 BTC from the wallet address 1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbh. The address is thought to belong to Silk Road because it received funds from a Silk Road address in 2013.
The keys to that address were reportedly circulating around hacker forums, encoded in an encrypted file. Ulbricht couldn't have moved the funds because he was in prison. Instead, a hacker most likely decrypted the encrypted file to gain access to the funds.
Possible Reasons Behind Historic Crypto Seizure
In 2012, Chainalysis discovered that the hacker began transferring funds from Silk Road to their own wallets. None of Silk Road's logs included their transactions, raising the possibility that they were the work of a hacker.
The Internal Revenue Service of the United States Treasury Department later seized all of the funds, which were worth $1 billion at the time.
In 2021, prosecutors and Ulbricht agreed that the hacker's money would be used to pay Ulbricht $183 million in compensation. This debt cancellation implies Ulbricht can transmit any money he earns while still in prison to family and friends. Furthermore, when he is released, he will owe no money.
What’s next?
According to the United States Attorney's Office for the Southern District of New York, James Zhong of Gainesville, Georgia, pleaded guilty on November 4 to wire fraud in September 2012. The maximum sentence for the crime is 20 years in prison.
What do you think about the historic seizure by the US Department of Justice? Share your views in the comment box below.
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