James Zhong: Silk Road hacker, 32, arrested after stolen bitcoin worth $3B found in POPCORN TIN

According to authorities, Zhong stole bitcoin from the illegal Silk Road marketplace, a dark web forum on which drugs and other illicit products were bought

James Zhong: Silk Road hacker, 32, arrested after stolen bitcoin worth $3B found in POPCORN TIN
US authorities seized about 50,676 bitcoin, then valued at over $3.36 billion, from James Zhong during a search of his house in Georgia (United States District Court of New York)
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GAINESVILLE, GEORGIA: More than $3 billion in stolen Bitcoin was discovered in a popcorn tin in the home of a Georgia man. Authorities are calling it the second-largest seizure of cryptocurrencies, and he now faces up to 20 years in prison. James Zhong, 32, admitted on Friday to taking bitcoin from the illegal Silk Road market ten years ago, which was shut down by FBI in 2013. On Monday, November 7, the US Department of Justice said that police searching Zhong's Gainesville home discovered 50,676 Bitcoin, which at the time had a market value of $3.36 billion, Daily Mail reports.

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Despite the fact that cryptocurrency has since lost value, the raid resulted in the second-largest seizure of cryptocurrency after the $3.6 billion in stolen cryptocurrency related to the 2016 breach at crypto exchange Bitfinex, with the price of Bitcoin falling to $15,632, its lowest level in two years. The second largest cryptocurrency, Ether, saw further declines on Wednesday, reaching its lowest level since July. Zhong pleaded guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison.

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Zhong called police to report "a burglary" in 2019, according to Lt Shaun Barnett of the Athens, Georgia, Police Department in an interview with media portal Protos. The IRS Criminal Investigation (IRS-CI) team apparently became interested in Zhong's case when he stated that several of his assets, including "a lot of Bitcoin," had been stolen while he was living in Athens, Georgia, in 2019. Zhong then called the police to report the theft. However, the burglary and the amount of money allegedly stolen 'raised a red flag with the IRS," Barnett said. The money was never recovered, and a suspect was never identified. In November 2021, the IRS-CI and Athens police executed a search warrant after an investigation that led to an arrest.

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Federal investigators claim the stolen bitcoin was discovered after they executed a search warrant at Zhong's Georgia home, ending a decade-long mystery. The digital tokens were hidden in a "single-board computer" kept in a bathroom near Zhong's home and hidden in a popcorn tin. Authorities also seized 11 1-ounce bars of silver and gold, $662,000 in cash, physical bitcoin coins, an 80 percent stake in a Memphis-based real estate investment firm with substantial assets, and another 80 percent of the company.

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In a statement, US attorney Damian Williams said in a statement, "James Zhong committed wire fraud over a decade ago when he stole approximately 50,000 Bitcoin from Silk Road." He added, "For almost 10 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."

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According to prosecutors, the dark web marketplace 'Silk Road' was the target of Zhong's fraud scheme. In September 2012, he allegedly set up nine accounts and tricked the site into paying him out many times his initial deposits by flooding it with withdrawal requests. After doing this 140 times, he removed all cryptocurrency holdings from the site. To avoid detection, he then transferred the bitcoin to different accounts. According to the US Attorney's Office, Silk Road is an online black market where illegal items and substances are sold to consumers. As of March 2022, Zhong handed over additional Bitcoin to the government that he had access to but had not yet spent.

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In total, Zhong voluntarily handed over 1,004 Bitcoin. His sentencing is scheduled for February 22, 2023.

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