November 07, (THEWILL) – The United States Government has seized a “historic” amount of crypto in the form of 50,676 Bitcoin valued at $3.36 billion in Silk Road dark web fraud perpetrated by James Zhong
The US Attorney’s Office, Southern District of New York, announced the seizure on Monday.
According to the court document, Zhong had in September 2012, executed a scheme to defraud Silk Road of its money and property by creating a string of approximately nine Silk Road accounts in a manner designed to conceal his identity.
He made over 140 transactions in rapid succession in order to trick Silk Road’s withdrawal-processing system into releasing approximately 50,000 Bitcoin from its Bitcoin-based payment system into his accounts and transferring the Bitcoin into a variety of separate addresses under ZHONG’s Zhong accounts.
Zhong had funded the “Fraud Accounts” with an initial deposit of between 200 and 2,000 Bitcoin.
After the initial deposit, he then quickly executed a series of withdrawals.
Zhong was said to have been able to withdraw many times, more Bitcoin out of Silk Road than he had deposited in the first instance. He also received a matching amount of Bitcoin Cash following “a hard fork”.
According to Attorney Damian Williams, “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 had 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.”
Tyler Hatcher, IRS-CI Special Agent in Charge, added: “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.”
According to the US Department of Justice (DoJ), on November 9, 2021, pursuant to a judicially authorized premises search warrant of Zhong’s Gainesville, Georgia, house, law enforcement seized approximately 50,676.17851897 Bitcoin, then valued at over $3.36 billion.
The seizure, the DoJ, said was the largest in history and the second-largest financial seizure ever.
Charged with wired fraud in 2012, Zhong on Friday, November 4, 2022, pleaded guilty before US District Judge Paul G. Gardephe, to one count of wire fraud, which carries a maximum sentence of 20 years in prison.
The US government is collectively attempting forfeiture of approximately 51,680.32473733 Bitcoin; Zhong’s 80% interest in RE&D Investments, LLC, a Memphis-based company with real estate holdings; $661,900 in cash seized from his home and “various metals” also seized.
