Ten-year hunt leads to 50,000 stolen Bitcoin stored in a popcorn tin and underground safe

Ten-year hunt leads to 50,000 stolen Bitcoin stored in a popcorn tin and underground safe
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The Department of Justice announced it’s seized around 50,676 Bitcoin that a 32-year-old from Georgia fraudulently obtained from The Silk Road — a site on the dark web once called “the Amazon of drugs” — in 2012. After seemingly tipping authorities off to his large cache of Bitcoin a few years ago, James Zhong pleaded guilty to the crime on Friday after authorities found the Bitcoin stored in an underground safe and on a “single-board computer” hidden in a popcorn tin in a bathroom closet, according to a press release from the DOJ.

The government seized the Bitcoin on November 9th, 2021, and says that it was worth over $3.36 billion at the time. Since then, the value has dropped precipitously; it’s now worth just over $1 billion. According to the press release, it’s the government’s second-largest financial seizure ever, topped only by the $3.6 billion in stolen Bitcoin it seized earlier this year in a case that allegedly involved TikToker / rapper / Forbes contributor Razzlekhan and her husband. (It is worth noting that, in absolute terms, that seizure involved significantly more Bitcoin: almost 95,000).

Image of a safe embedded in a wood floor, which contains cash and two metal objects.

a:hover]:text-black [&>a]:shadow-underline-gray-63 [&>a:hover]:shadow-underline-black text-gray-63″>Image: Department of Justice

An IRS investigator in charge of the case calls Zhong’s heist “a sophisticated scheme” and says that he carried out “a series of complex transactions” designed to hide the ill-gotten Bitcoin. According to the DOJ, in September 2012, he registered nine fake accounts on The Silk Road, a Tor site designed to let people buy and sell drugs, weapons, hacking tools, and other illegal goods and services over the internet. Zhong would then deposit anywhere from 200 to 2,000 Bitcoin in the account (at the time, the cryptocurrency was worth around $10–12 per coin) and then send several withdrawal requests — sometimes up to five in a single second. According to the DOJ, this exploit tricked the site into returning several times what he had initially deposited.

Doing this around 140 times emptied The Silk Road’s coffers — the site kept a maximum figure of 50,000 Bitcoin on hand at a given time, according to a document filed by an IRS investigator. Zhong’s take rose in 2017 when everyone who owned the cryptocurrency also got an equivalent amount of another currency called Bitcoin Cash, after the latter split off from the main blockchain to become its own entity. The DOJ says Zhong then traded his 50,000 Bitcoin Cash for 3,500 regular Bitcoin, adding to his collection.

While the DOJ doesn’t go in-depth into how it tracked down the stolen Bitcoin, part of what got Zhong caught was a call he made to police in 2019, according to Protos. The report says that he reported a burglary, listing “a lot of bitcoin” among the items taken. Obviously, the robbers missed a lot of things — though the IRS did not.

Earlier this year, Zhong’s counsel also surrendered around 860 additional Bitcoin to the government, getting it closer to its goal of rounding up as much of the money that Silk Road founder Ross Ulbricht made from the platform as possible — hence the slightly ironic situation where Zhong is being prosecuted for committing wire fraud against a criminal entity. According to the DOJ, he faces a maximum of 20 years in prison and is set to be sentenced on February 22nd, 2023.


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