US Announces ‘Historic $3.36 Billion Cryptocurrency Seizure’ As Silk Road Bitcoin Thief Pleads Guilty – Bitcoin News Regulator

The man who stole more than 50,000 bitcoins from the Silk Road market has pleaded guilty. According to the US Department of Justice, the seizure “at the time was the largest crypto seizure” in the history of the Department of Justice and “remains the Department’s second largest ever financial forfeiture.”

Silk Road Exploiter Claims Guilty

The US Department of Justice (DOJ) announced Monday that James Zong pleaded guilty Friday to “committing cyber fraud in September 2012 when he illegally obtained more than 50,000 bitcoins from the Silk Road darknet market.” The Department of Justice also announced a “historic $3.36 billion cryptocurrency forfeiture” in connection with the case.

The Department of Justice explained that law enforcement conducted a search at Zhong’s home in Gainesville, Georgia, on November 9, 2021, and “staffed approximately 50676.17851897 bitcoins, then valued them at more than $3.36 billion,” explaining:

This was the largest forfeiture of cryptocurrency in the history of the US Department of Justice, and today remains the second largest financial forfeiture of the Department of Justice ever.

Zhong also had about 3,500 additional bitcoins from the exchange to BTC over the 50,000 Bitcoin Cash (BCH) he obtained after the bitcoin blockchain hard fork in August 2017. He used an offshore crypto exchange to transfer.

In addition to the BTC seized at his home, Zhong began “voluntarily surrendering additional bitcoins to the government” beginning in March of this year, the Department of Justice revealed, adding that “in total, Zhong voluntarily surrendered an additional 1,004.14621836 bitcoins.”

US Announces 'Historic $3.36 Billion Cryptocurrency Seizure' As Silk Road Bitcoin Thief Pleads Guilty

The Department of Justice noted that the government is seeking to confiscate “approximately 5,1680.32473733 bitcoins.” At the time of writing, BTC was trading at $20,641.28, so the amount requested by the government is around $1.07 billion.

Zhong scheme to defraud the Silk Road Market

The Ministry of Justice said that Zhong carried out a scheme to defraud Silk Road market funds and property in September 2012, adding that he “was able to withdraw bitcoins from the Silk Road many times more than he had initially deposited.” For example, the Department of Justice detailed this on September 19, 2012:

Zhong deposited 500 bitcoins into the Silk Road wallet. Less than five seconds after making the initial deposit, Zhong made five withdrawals of 500 bitcoins in quick succession – that is, in the same second – resulting in a net profit of 2,000 bitcoins.

On Monday, the U.S. government filed an amended preliminary injunction in the United States against the Ross Ulbricht case “seeking the confiscation of approximately 5,1351.89785803 traceable Bitcoins to the Silk Road, valued at approximately $3,388,817,011.90 at the time of the seizure.” Silk Road founder Ross Ulbricht was convicted in 2015 and is currently serving a double life sentence, plus 40 years without parole.

US District Judge Paul Gardevi also entered a preliminary approval order for forfeiture Friday for 154.4268793000044 BTC, $661,900 in cash, 25 Casascius (physical bitcoin) worth approximately 174 BTC, various metals, and Zhong’s 80% stake in Memphis-based RE&D Investments LLC . The Ministry of Justice explained that the metals seized consisted of “four one-ounce silver bars, three one-ounce gold-colored bars, four 10-ounce silver bars, and a gold-colored coin.”

After the Justice Department’s announcement, some people on social media began noticing that one of Zhong’s BTC addresses disclosed in a court document matched an address posted by a Bitcointalk user “Loaded”. Bitmex Research chirp: “In March 2017, a Bitcointalk user ‘Loaded’ signed a message from an address with 40,000 bitcoin, requesting a 1 to 1 swap of ‘Bitcoin Unlimited’ with Roger Ver. It now appears that the funds have been confiscated by US authorities.”

Commenting on Loaded’s Bitcointalk post, founder Ver stated: “As I recall, he has never responded to my direct messages about placing a bet.”

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What do you think of this case? Let us know in the comments section below.

Kevin Helms

Kevin, an Austrian economics student, found Bitcoin in 2011 and has been a missionary ever since. His interests lie in Bitcoin security, open source systems, network effects, and the intersection of economics and cryptography.

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