During a search of Zhong’s property in Georgia late last year, law enforcement found the stolen Bitcoin worth over $3.36 billion, along with other assets. Zhong pled guilty to wire fraud on Monday and will be sentenced in February 2023. He could face up to 20 years in jail. “For almost ten years, the whereabouts of this massive chunk of missing Bitcoin had ballooned into an over $3.3 billion mystery,” Damian Williams, U.S. Attorney for the Southern District of New York, said. “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.”
Second-Largest Crypto Seizure Ever
During the raid on Zhong’s property in Gainsville on November 9 last year, Internal Revenue Service (IRS) agents found about 50,491 BTC stashed in an underground safe and on a single-board computer (SBC) in a popcorn tin wrapped in blankets in his bathroom closet. An SBC is like a desktop PC but is printed on a circuit board, making it compact and durable. It is easy to set up, produces low heat, and uses less power than a bulky PC. The Raspberry Pi is an SBC. IRS agents also found about $661,000 in cash, rare Casascius coins (physical Bitcoin valued at 174 BTC), over 11 additional BTC, and several bars of metal (possibly silver and gold) in Zhong’s property. Since March this year, Zhong has been collaborating with law enforcement and has given up an additional 1,004 BTC, the DoJ said in a press release. The government is seeking a court order for Zhong to forfeit a total of about 51,680 BTC, the other assets found in his home, and his 80 percent stake in RE&AD Investments, a Memphis company with “substantial” real estate investments. Zhong invested the stolen funds in real estate and other businesses, created a company, and regularly displayed his lavish life on social media, the DoJ said. U.S. Attorney Williams explained that the disappearance of approximately 50,000 BTC baffled law enforcement for ten years, but cutting-edge cryptocurrency tracing and investigations by IRS agents paid off. This seizure is second only to the 94,000 BTC (worth $3.36 billion at the time) recovered from a Manhattan couple in February. The couple was charged with conspiracy to launder the hefty sum stolen from the Bitfinex crypto exchange.
Silk Road Exploit
According to the DoJ, Zhong exploited a loophole in the Silk Road marketplace to steal over 50,000 BTC. Silk Road is possibly the most notorious dark web marketplace. Criminals traded drugs, stolen properties, and other illegal items on the platform. Silk Road was launched in February 2011, and after extensive investigations, the Federal Bureau of Investigation (FBI) shut down the illicit marketplace in October 2013. Zhong did not sell any product or service on Silk Road. Instead, using several accounts he created on the platform in 2012, he triggered over 140 rapid transactions, tricking the Silk Road’s withdrawal-processing system into giving him over 50,000 BTC. In one instance, in September 2012, Zhong deposited 500 BTC into a Silk Road wallet and immediately executed five withdrawals of 500 BTC in less than five seconds, raking in 2,000 BTC, the DoJ said. Zhong transferred the stolen BTC to different wallets he controlled “to prevent detection, conceal his identity and ownership, and obfuscate the Bitcoin’s source,” the DoJ added. “Mr. Zhong executed a sophisticated scheme designed to steal bitcoin from the notorious Silk Road Marketplace,” Tyler Hatcher, the Special Agent in Charge of the Internal Revenue Service, Criminal Investigation, Los Angeles Field Office, said. “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.’” Trading crypto has become increasingly risky as criminals employ elaborate schemes to defraud victims. Our guide to trading Bitcoin safely contains some valuable tips on how to avoid falling victim to scammers.
