By
Bhushan Akolkar
May 14th, 2024
The hacker used a “sophisticated scheme” to steal Bitcoins from the Silk Road. He crated nine fraudulent accounts to siphon off money from the darknet marketplace.
On Monday, November 7, the US Department of Justice (DoJ) announced that its authorities seized more than 50,000 Bitcoins from a hacker who stole them from the Silk Road a decade ago.
Silk Road Case
This is also the biggest cryptocurrency seizure ever and the second-largest of any kind in history. JAMES ZHONG pleaded guilty to the wire fraud that he conducted back in September 2012. Law enforcement had actually seized the entire 50,676 Bitcoins stolen and back then it was valued at $3.36 billion. However, its value has dropped to $1.04 billion amid the Bitcoin price correction this year.
During their investigation, the authorities tracked down the Bitcoin address in Georgia belonging to James Zhong. They found the Bitcoins in the bulk of private keys in an underground safe and “on a single-board computer that was submerged under blankets in a popcorn tin stored in a bathroom closet.” In addition to the Bitcoins, the Fed also found $661,900 in cash along with some very precious metals.
The Silk Road was one of the first major darknet marketplaces. It allowed merchants to sell some illegal wares in exchange for Bitcoin. Using a range of fake accounts, Zhong managed to trick Silk Road’s payments processor into giving him Bitcoins.
A Warning from the US DoJ
The US Justice Department publicized the seizure almost a year. Back then, it was the largest seizure in history. But earlier this year in February, the US DoJ seized 70,000 Bitcoins in relation to a hack on the crypto exchange Bitfinex. Speaking on the development, US Attorney Damian Williams said:
“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.”
In its report, the US DoJ also mentioned that Zhong received 50,000 in Bitcoin Cash (BCH) as the Bitcoin network split in August 2017. “ZHONG thereafter exchanged through an overseas cryptocurrency exchange all of the BCH Crime Proceeds for additional Bitcoin, amounting to approximately 3,500 Bitcoin of additional crime proceeds,” they added.