The US government has seized a “historic” amount of crypto in the form of 50,676 Bitcoin valued at $3.36 billion.
The US Attorney’s Office, Southern District of New York, has announced that the seizure was in relation to the Silk Road dark web fraud.
James Zhong pleaded guilty this past Friday, November 4, 2022, before US District Judge Paul G. Gardephe. Zhong was charged with committing wire fraud in 2012.
The Department of Justice stated that on November 9, 2021, pursuant to a judicially authorized premises search warrant of Zhong’s Gainesville, Georgia, house, law enforcement seized approximately 50,676.17851897 Bitcoin, then valued at over $3.36 billion. The seizure of crypto was the largest in history and the second-largest financial seizure ever.
The US government is collectively attempting forfeiture of approximately 51,680.32473733 Bitcoin; Zhong’s 80% interest in RE&D Investments, LLC, a Memphis-based company with real estate holdings; $661,900 in cash seized from his home and “various metals” also seized. The Bitcoin was said to have been hidden in various devices.
US Attorney Damian Williams stated:
“James Zhong committed wire fraud over a decade ago when he stole approximately 50,000 Bitcoin from Silk Road. For almost ten years, the whereabouts of this massive chunk of missing Bitcoin had ballooned into an over $3.3 billion mystery. Thanks to state-of-the-art cryptocurrency tracing and good old-fashioned police work, law enforcement located and recovered this impressive cache of crime proceeds. 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.”
Tyler Hatcher, IRS-CI Special Agent in Charge, added:
“Mr. Zhong executed a sophisticated scheme designed to steal bitcoin from the notorious Silk Road Marketplace. Once he was successful in his heist, he attempted to hide his spoils through a series of complex transactions which he hoped would be enhanced as he hid behind the mystery of the ‘darknet.’ IRS-CI Special Agents are the best in the world at following the money through cyberspace or wherever our financial investigations lead us. We will continue to work with our partners at the US Attorney’s Office to track down these criminals and bring them to justice.”
Justice states that in September 2012, Zhong executed a scheme to defraud Silk Road of its money and property by:
- (a) creating a string of approximately nine Silk Road accounts (the “Fraud Accounts”) in a manner designed to conceal his identity;
- b) triggering over 140 transactions in rapid succession in order to trick Silk Road’s withdrawal-processing system into releasing approximately 50,000 Bitcoin from its Bitcoin-based payment system into ZHONG’s accounts; and
- (c) transferring this Bitcoin into a variety of separate addresses also under ZHONG’s control, all in a manner designed to prevent detection, conceal his identity and ownership, and obfuscate the Bitcoin’s source.
Apparently, Zhong funded the “Fraud Accounts” with an initial deposit of between 200 and 2,000 Bitcoin.
After the initial deposit, he then quickly executed a series of withdrawals. Zhong was said have been able to withdraw many times more Bitcoin out of Silk Road than he had deposited in the first instance. Zhong also received a matching amount of Bitcoin Cash following a hard fork.
Zhong pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison.
