The US Department of Justice announced on Monday that it has proceeded to seize stolen bitcoin worth a total of $3.36 billion during a 2021 raid by federal authorities, which has not yet been announced, on the residence of James Zhong.
This is the second largest cryptocurrency recovery ever achieved, following the seizure of $3.6 billion in a 2016 case of alleged cryptocurrency theft from cryptocurrency exchange Bitfinex, which was disclosed by the US Department of Justice in February.
Zhong pleaded guilty on Friday to computer fraud, which carries a maximum sentence of 20 years in prison.
Notably, US federal authorities seized about 50,676 bitcoins, worth more than $3.36 billion, during a search of Zhong’s home in Gainesville, Georgia, on November 9 last year, according to the Justice Department announcement.
According to authorities, Zhong stole the bitcoins from the illegal Silk Road marketplace, a dark web forum in which drugs and other illegal goods were bought and sold through cryptocurrency transactions. Silk Road began operating in 2011, but the FBI shut down the forum in 2013. Its founder, Ross William Ulbricht, is serving a life sentence.
“For nearly ten years, the whereabouts of this massive amount of missing bitcoin has emerged as a mystery worth more than $3.3 billion,” US Attorney Damian Williams said via press release.
FBI Special Agent in Charge Tylen Hatcher of the US Treasury Department’s Criminal Investigations Division said Zhong used a “complex scheme” to steal the bitcoins from Silk Road.
According to the press release, in September 2012, Zhong created nine fake accounts on Silk Road, putting between 200 and 2,000 bitcoins in each. He then activated over 140 quick succession transactions, which fooled the forum’s withdrawal processing system, releasing approximately 50,000 bitcoin into his accounts. Zhong then transferred the bitcoins to various wallet addresses under his control.
Through blockchain analysis tools and good old-fashioned police work, law enforcement agencies and blockchain technology experts were able to recover more than 50,000 bitcoin from Zhong.
Public records show that Zhong was the founder, president and CEO of JZ Capital LLC, while he, according to his LinkedIn profile, focused on “investment and venture capital.”
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