US Officials Announce Convictions Related to Bitcoin Stolen from Silk Road

The US Attorney’s Office for the Southern District of New York announced in 2012 that an individual had pleaded guilty to wire fraud charges related to bitcoin “illegally obtained” from the Silk Road Marketplace.

In a November 7 announcement, the U.S. Department of Justice said James Zhong pleaded guilty to wire fraud charges related to carrying out a plot to steal approximately 50,676 bitcoins (BTC) from Silk Road. Authorities seized bitcoin from his Mr. Zhong’s home in Georgia in November 2021, at which point the total value of the cryptocurrency was around $3.36 billion.

“James Zong committed a wire transfer fraud over a decade ago when he stole about 50,000 bitcoins from Silk Road,” said federal prosecutor Damien Williams. “For nearly his decade, the whereabouts of this trove of missing bitcoins has ballooned into a mystery worth over $3.3 billion.”

Williams cited “state-of-the-art cryptocurrency tracking” and “good old-fashioned police work” as authorities track down and recover stolen BTC. IRS special agents raided Mr. Zhong’s property, finding more than 50,491 BTC in a floor safe and a “single-board computer submerged under a blanket of popcorn cans,” plus another vault worth more than 11 BTC. , $661,900 in cash, and 25 Casasius Coins worth about 174 BTC.

“This incident shows that we never stop chasing money, no matter how cleverly hidden, even in the circuit board at the bottom of a popcorn can.”

According to the Justice Department, Zhong’s plan involves creating nine accounts on the market to hide his identity and “tricking Silk Road’s withdrawal processing system” to trigger more than 140 transactions in a short period of time to get BTC. It included sending He was able to set up an account with “minimal information” and never listed or sold anything. After withdrawing more of his BTC than he deposited, Zhong moved his funds out of Silk Road and “combined them into his two hefty sums.”

“As an example, on September 19, 2012, Zhong deposited 500 bitcoins into a Silk Road wallet,” the DOJ said. “In less than five seconds after he made his first deposit, Zhong withdrew his 500 Bitcoins five times in quick succession. So within the same second, a net profit of 2,000 Bitcoins. brought.”

Related: DoJ Seizes $3.6 Billion in Cryptocurrency, Arrests 2 in Connection with 2016 Bitfinex Hack

Non-functional for almost a decade, Silk Road initially allowed users to buy and sell illicit goods such as weapons and stolen credit card information. However, the market caught the attention of the FBI as many of the listings were for illegal drugs.

Silk Road creator Ross Ulbricht was arrested for his role in 2013 and is currently serving two life sentences with no possibility of parole. Zhong could face up to 20 years in prison for wire fraud. He is scheduled to be sentenced in February 2023.