After a decade of hunting, the Justice Department has made its second-largest-ever seizure of cryptocurrency, confiscating more than 51,680 Bitcoin.
The digital tokens were previously held by James Zhong, who has pled guilty to stealing them from the Silk Road, a once infamous dark web site that was known as the “Amazon of drugs” for its access to illegal drugs, weapons, and services. While there’s no love lost between law enforcement officials and that site, Zhong’s theft of the Bitcoin was no less criminal.
Officials found the Bitcoin after serving a search warrant on Zhong’s home in Gainesville, Ga. A “single board computer” was found hidden in a popcorn tin in a bathroom closet that held the digital tokens.
“James Zhong committed wire fraud over a decade ago when he stole approximately 50,000 Bitcoin from Silk Road,” said U.S. Attorney Damian Williams in a statement this week. “For almost 10 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.”
About that dollar figure: The Bitcoin were seized on Nov. 9, 2021, Justice Department officials say. At the time, it was worth $3.36 billion. Bitcoin, though, has dropped precipitously since then, and as of Tuesday morning, the Bitcoin seized was worth just over $1 billion.
The Justice Department in 2017 sold off other Bitcoin taken directly from the Silk Road for just over $48 million.
Justice Department officials say Zhong registered nine fake accounts on the Silk Road in September 2012, depositing between 200 and 2,000 Bitcoin into the account. He would then flood the site with withdrawal requests (as many as five per second), which tricked the site into giving him multiples of what he had deposited. After doing this 140 times, he had withdrawn all of the site’s cryptocurrency holdings.
Zhong also forfeited $662,000 in cash, physical Bitcoin coins, an 80% interest in a Memphis-based real estate investment company with substantial holdings, and more.
He’s facing up to 20 years in prison.
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