Get the popcorn ready: federal prosecutors have recovered $3.36 billion worth of Bitcoins after a decade-long search. And yes, it was stored in a popcorn tin.
Justice Department Seizes $3.36 Billion in Bitcoin
The U.S. Justice Department seized 51,680 Bitcoins in the second-largest seizure of cryptocurrency ever recorded–second only to a $3.6 billion seizure of a married couple earlier this year. The value since, however, has dropped two-thirds since the snatch. And may go down further if Bitcoin goes lower to $13k as predicted.
James Zhong has pled guilty to the theft and has admitted to stealing them from the Silk Road–a dark web site that has been so eloquently dubbed the “Amazon of drugs.” It has a known history of being easy to access weapons, drugs and other services–like stealing Bitcoin.
Law enforcement officials found the stolen tokens after obtaining a search warrant on Zhong’s home in Gainesville, GA. Found hidden in a popcorn tin in a bathroom closet was a “single board computer.”
“For almost 10 years, the whereabouts of this massive chunk of missing Bitcoin had ballooned into an over $3.3 billion mystery,” said Damian Williams, U.S. attorney. “James Zhong committed wire fraud over a decade ago when he stole approximately 50,000 Bitcoin from Silk Road.”
Bitcoin has cratered a bit since the stolen tokens were confiscated on Nov. 9, 2021. Worth $3.36 billion at the time, the 51,680 tokens are now valued at just over $1 billion.
This isn’t the first time the Justice Department and Silk Road have met. Stolen Bitcoin from the site was sold off in 2017 for over $48 million.
Zhong was able to accomplish this feat by outwitting the Silk Road site.
A Sophisticated Scheme, No Doubt
In September 2012, Zhong registered nine fake accounts on the site and deposited between 200 and 2,000 BTC. Officials say he then made as many as five withdrawal requests per second–thereby deluding the site into giving him multiples of what he deposited.
“As an example, on September 19, 2012, Zhong deposited 500 Bitcoin into a Silk Road wallet,” prosecutors said. “Less than five seconds after making the initial deposit, Zhong executed five withdrawals of 500 Bitcoin in rapid succession–resulting in a net gain of 2,000 Bitcoin.”
It was after he did this 140 times that he had the entirety of the site’s crypto holdings.
One of Zhong’s fake accounts made a single deposit and over 50 withdrawals before the site shut the account down. Bitcoin completed a hard fork coin split in August 2017 and Zhong’s 50,000 Bitcoin received a matching number of BTC cash coins.
Zhong pled guilty to wire fraud on Friday and is looking at up to 20 years in prison. Additionally, he forfeited $662,000 in cash, actual Bitcoin tokens and an 80% interest in a real estate investment company located in Memphis.
James Zhong is scheduled to be sentenced on Feb. 22, 2023.