Ten-year hunt results in 50,000 stolen Bitcoin saved in a popcorn tin and underground secure

The Division of Justice introduced it’s seized round 50,676 Bitcoin {that a} 32-year-old from Georgia fraudulently obtained from The Silk Highway — a web site on the darkish internet as soon as referred to as “the Amazon of medicine” — in 2012. After seemingly tipping authorities off to his massive cache of Bitcoin a couple of years in the past, James Zhong pleaded responsible to the crime on Friday after authorities discovered the Bitcoin saved in an underground secure and on a “single-board laptop” hidden in a popcorn tin in a toilet closet, based on a press launch from the DOJ.

The federal government seized the Bitcoin on November ninth, 2021, and says that it was price over $3.36 billion on the time. Since then, the worth has dropped precipitously; it’s now price simply over $1 billion. In response to the press launch, it’s the federal government’s second-largest monetary seizure ever, topped solely by the $3.6 billion in stolen Bitcoin it seized earlier this 12 months in a case that allegedly concerned TikToker / rapper / Forbes contributor Razzlekhan and her husband. (It’s price noting that, in absolute phrases, that seizure concerned considerably extra Bitcoin: nearly 95,000).

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

The underground secure the place investigators discovered Bitcoin wallets, money, bodily Bitcoin, and what seemed to be gold and silver bars.
Picture: Division of Justice

An IRS investigator in control of the case calls Zhong’s heist “a complicated scheme” and says that he carried out “a sequence of complicated transactions” designed to cover the ill-gotten Bitcoin. In response to the DOJ, in September 2012, he registered 9 pretend accounts on The Silk Highway, a Tor web site designed to let individuals purchase and promote medication, weapons, hacking instruments, and different unlawful items and companies over the web. Zhong would then deposit anyplace from 200 to 2,000 Bitcoin within the account (on the time, the cryptocurrency was price round $10–12 per coin) after which ship a number of withdrawal requests — typically as much as 5 in a single second. In response to the DOJ, this exploit tricked the location into returning a number of instances what he had initially deposited.

Doing this round 140 instances emptied The Silk Highway’s coffers — the location saved a most determine of fifty,000 Bitcoin readily available at a given time, based on a doc filed by an IRS investigator. Zhong’s take rose in 2017 when everybody who owned the cryptocurrency additionally received an equal quantity of one other foreign money referred to as Bitcoin Money, after the latter break up off from the primary blockchain to develop into its personal entity. The DOJ says Zhong then traded his 50,000 Bitcoin Money for 3,500 common Bitcoin, including to his assortment.

Whereas the DOJ doesn’t go in-depth into the way it tracked down the stolen Bitcoin, a part of what received Zhong caught was a name he made to police in 2019, based on Protos. The report says that he reported a housebreaking, itemizing “plenty of bitcoin” among the many gadgets taken. Clearly, the robbers missed plenty of issues — although the IRS didn’t.

Earlier this 12 months, Zhong’s counsel additionally surrendered round 860 further Bitcoin to the federal government, getting it nearer to its purpose of rounding up as a lot of the cash that Silk Highway founder Ross Ulbricht made out of the platform as doable — therefore the marginally ironic scenario the place Zhong is being prosecuted for committing wire fraud towards a prison entity. In response to the DOJ, he faces a most of 20 years in jail and is ready to be sentenced on February twenty second, 2023.

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