During a previously unannounced 2021 raid on James Zhong's home, the U.S. Department of Justice reportedly discovered around $3.36 billion in stolen bitcoin.
Zhong entered a guilty plea on Friday to one count of wire fraud, which carries a potential 20-year jail term.
Approximately 50,676 bitcoin, which were then worth over $3.36 billion, were taken from Zhong by American police on November 9, 2021, when they searched his home in Gainesville, Georgia, according to the DOJ. Following its seizure of $3.6 billion in allegedly stolen cryptocurrency tied to the 2016 breach of the cryptocurrency exchange Bitfinex, which the DOJ revealed in February, it is the DOJ's second-largest financial seizure to date.
Authorities claim that Zhong stole bitcoin from the unlicensed Silk Road bazaar.a forum on the dark web where narcotics and other illegal goods could be bought and sold using cryptocurrencies. Launched in 2011, Silk Road was shut down by the Federal Bureau of Investigation in 2013. Ross William Ulbricht, who founded it, is currently incarcerated for the rest of his life.
According to a news release from the U.S. Attorney, Damian Williams, "for almost ten years, the whereabouts of this large chunk of missing Bitcoin had inflated into an over $3.3 billion mystery."
The Southern District of New York claims that Zhong carried out the hack by utilising the market's flaws.According to a press release, in September 2012, Zhong opened nine phoney accounts on Silk Road and funded each one with 200–2,000 bitcoin. The marketplace's withdrawal-processing system was duped into releasing almost 50,000 bitcoin into his accounts after he immediately started over 140 transactions. The bitcoin was subsequently moved by Zhong into a number of his own controllable wallet accounts.
The dark web: a method of accessing the hidden internet
The dark web: a method of accessing the hidden internet
Law enforcement and blockchain analytic professionals were able to reclaim more than 50,000 bitcoin from Zhong thanks to blockchain analysis and good old-fashioned police work. According to the press release, they even discovered crypto on a computer buried under blankets in a popcorn tin in a bathroom closet.
Zhong utilised a "sophisticated strategy," according to Special Agent in Charge Tyler Hatcher of the Internal Revenue Service's Criminal Investigation, to steal the bitcoin from Silk Road. Consequently, theAccording to public documents, Zhong was the president and chief executive officer of JZ Capital LLC, a self-founded business that he incorporated in Georgia in 2014. His work there was mostly centred on "investments and venture capital," according to his LinkedIn page.
Additionally, according to his profile, he was a "significant early investor in bitcoin with comprehensive knowledge of its inner workings" and had experience with software development for computer programming languages.
Zhong has images of himself on yachts, in front of jets, and at prestigious football matches on his social media pages.
But even when the Silk Road closed down, these kinds of hacks continued. Criminals continue to have access to cryptocurrency platforms.
The largest cryptocurrency exchange in the world by trading volume, Binance, experienced a $570 million hack in October 2022. The business statedHackers were able to take advantage of BSC Token Hub, a cross-chain bridge, due to a flaw in a smart contract. As a result, the hackers removed BNB tokens, the platform's native cryptocurrency.
The largest hack to date occurred in March 2022 when a different hacker discovered holes in the decentralised finance network Ronin Network and made off with more than $600 million. The wallets' private keys, which act as passwords to secure bitcoin funds, were stolen.
In comparison to just under $1.2 billion at the same point in 2021, a Chainalysis analysis states that until July 2022, $1.9 billion in cryptocurrencies had been stolen through service hacks.
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