US announces historic $3.36 billion cryptocurrency seizure

Adeniyi Odukoya
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The US government arrested James Zhong on November 9th, 2021, and confiscated roughly 50,676.17851897 bitcoin, estimated to be more than $3.36 billion worth of cryptocurrency, from his Georgia home.

Officials found the bitcoin in an underground floor safe and on a single-board computer hidden under blankets in a popcorn tin in a bathroom closet.

The U.S. Attorney for the Southern District of New York said that James Zhong of Gainesville, Georgia, pleaded guilty on November 4 to committing wire fraud in September 2012. The charge carries a maximum sentence of 20 years in prison.

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The seizure at that time stood as the largest cryptocurrency seizure in the sophisticated and crime-blurred history of the U.S. Department of Justice. Today, it ranks as the department’s second-largest financial seizure ever.

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James Zhong’s involvement in Silk Road and the theft of cryptocurrency

Silk Road kicked off operations between 2011 and 2013. Recognized by all as a dark web market. it was deployed by diverse drug dealers and illegal operators to circulate drugs and other illegal products and utilities to traders. 

The founder, Ross Ulbricht, was arrested, found guilty by a jury, and received a life sentence.

In 2012, Zhong’s witty-taut mischief stole a staggering sum of money and property from Silk Road. He successfully perpetuated this fraud by establishing a tangle of nearly nine Silk Road accounts (the “Fraud Accounts”) in a pattern properly delineated to mask his identity; 

He initiated more than 140 transactions quickly to lure Silk Road’s withdrawal-processing system into dispensing roughly 50,000 bitcoin from its Bitcoin-centered payment system into his accounts. Zhang directed the bitcoins into a group of different addresses controlled by him to ensure that the fraud remained untraceable and irrecoverable.

ZHONG avoided enlisting any product or utility for sale on Silk Road, nor did he purchase any product or utility on Silk Road. The accounts he registered on Silk Road contained the minimal information necessitated by Silk Road to have an account with them. It turned out the accounts were schemes to orchestrate the fraud long intended by Zhong utterly.

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ZHONG’s conviction and prosecution for stealing cryptocurrency

The government is looking to forfeit collectively the following: nearly 51 680.32473733 Bitcoin; ZHONG’s 80% interest in RE&D Investments, LLC, a Memphis-located company with considerable real estate holdings; $661 900 in cash apprehended from ZHONG’s residence; and numerous metals also collected from his home.

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U.S Attorney Damian Williams had this to say: “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 have 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.”

IRS-CI Special Agent in Charge Tyler Hatcher said: “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.”

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