As announced by the U.S. Attorney’s office for the Southern District of New York, a defendant who pleaded guilty to wire fraud charges related to “unlawfully obtained” Bitcoin (BTC) from the Silk Road marketplace has been finally been sentenced. The 32-year-old James Zhong stole more than 50,000 Bitcoins from the infamous drug-trafficking site back in 2012 when BTC was worth around $12.
Second Highest Bitcoin Heist
According to reports, Zhong was able to hide his theft for about ten years before being apprehended. However, in November 2021, American officials raided Zhong’s home in Georgia and seized all Bitcoin assets, discovering the majority of the digital currency in a floor safe and a computer hidden inside a popcorn tin. At the time, the value of the cryptocurrencies was around $3.4 billion, making it the second-largest financial seizure in US history.
In the U.S. Attorney’s sentencing memo for Silk Road Bitcoin stealer James Zhong: investigators seized criminal proceeds from “a single-board computer that was submerged under blankets in a popcorn tin stored in a bathroom closet.” (Sentencing is today at 3 pm). pic.twitter.com/7aamQryQ6B
— Rachel Scharf (@rscharf_) April 14, 2023
The prosecutors claim that Zhong spent nearly $16 million of the revenues on investments in real estate, luxury hotels, lavish pubs, nightclubs, and in owning a fleet of Lamborghinis. Considering today’s Bitcoin price, the confiscated asset is now estimated to be around $1.56 billion.
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Exploiting Silk Road’s Flaw
Zhong reportedly took advantage of an inherent flaw in Silk Road’s wallet feature which eventually led him to multiplying his Bitcoin stack. The U.S. Department of Justice notes that in one instance, Zhong transferred 500 bitcoins into a wallet and within five seconds made five quick withdrawals. By doing so, he exploited a weakness in Silk Road’s system, which resulted in his initial investment turning into 2,500 Bitcoins.
Additionally, Zhong enjoyed the hard fork split that occurred in 2017 between Bitcoin and Bitcoin Cash (BCH), were he received and equivalent amount of 50K BCH as well. Apart from the 50K Bitcoins, the law enforcement were also able to seize nearly $662,000 in cash, 25 Casascius coins and metal coins which represented physical Bitcoins but in reality contained private keys to gain access to the real virtual currency.
Also Read: This SEC Commissioner Wants To Redefine ‘Exchange’; Will It Save Crypto In US?
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