Silk Road Hacker Sentenced After Police Seize 50,000 BTC

The Silk Road hacker tried to hide stolen bitcoin and cash from law enforcement in a Cheetos popcorn container

article-image

Alexander Supertramp/shutterstock modified by Blockworks

share

The Department of Justice announced sentencing in a Silk Road hacking case following a seizure of 51,000 bitcoin over the past two years. 

In 2012, defendant James Zhong amassed the bitcoin through a scheme where he triggered “over 140 transactions in rapid succession to trick Silk Road’s withdrawal-processing system into releasing approximately 50,000 Bitcoin from its Bitcoin-based payment system into” his accounts. Using a combination of a mixer, a foreign cryptocurrency exchange and an “impressive array of technological tools to frustrate tracing efforts,” Zhong transferred the bitcoin (BTC) into multiple accounts in an attempt to evade detection.

Following the hack, Zhong seemingly managed to avoid police scrutiny for nine years. In November 2021, police in Gainesville, Georgia, executed a search warrant on Zhong’s property. They recovered over 50,0000 bitcoin in a “single board computer,” a Cheetos popcorn tin and an underground floor safe. 

They were also able to find over $661,000 in cash, and 25 casascius coins — which are physical bitcoins that contain a private key to a bitcoin wallet.

Following Zhong’s arrest, he willingly handed over more bitcoin that had been amassed from the fraud scheme. 

At the time of the seizure, Zhong’s bitcoin stash had a conservative value of $3.4 billion, but it’s now worth around $1.57 billion following the market volatility and crypto winter. However, the estimates are based on the lowest possible price.

Zhao was sentenced to a year and a day in prison for the 2012 wire fraud.

The sentencing announcement comes as both the SEC and the FBI look to boost their crypto teams to crack down on both individual and institutional crime. 

In April, the SEC tweeted that it’s looking to hire three general attorneys in New York, San Francisco and Washington, D.C. to focus on crypto crime.  

Back in February, the FBI and the Justice Department announced a new unit focused on crypto crimes called the National Cryptocurrency Enforcement Team (NCET). NCET will investigate cases where criminal activity in digital assets is suspected, with a focus on crypto exchanges and infrastructure companies.


Get the day’s top crypto news and insights delivered to your email every evening. Subscribe to Blockworks’ free newsletter now.


Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from Blockworks Research’s Daily Debrief.


Can’t wait? Get our news the fastest way possible. Join us on Telegram and follow us on Google News.


Tags

upcoming event

MON - WED, MARCH 18 - 20, 2024

Digital Asset Summit (DAS) is returning March 2024. This year’s event will be held in our nation’s capital, where industry leaders, policymakers, and institutional experts will come together to discuss the latest developments and challenges in the ever-evolving world of cryptocurrency. […]

upcoming event

MON - WED, SEPT. 11 - 13, 2023

2022 was a meme.Skeptics danced, believers believed.Eventually, newcomers turned away, drained of liquidity and hope.Now, the tide is shifting and it’s time to rebuild. Permissionless II is the brainchild of Blockworks and Bankless. It’s not just a conference, but a call […]

recent research

Cosmos Hub: ATOM Economic Zone

Research

Replicated Security, the Hub’s Validation-as-a-Service offering that went live in March, is the first step in bringing value accrual to ATOM stakers.

/

article-image

OP holders might not be feeling very optimistic with the rollup’s token unlock schedule now in effect

article-image

Two lords are pushing for the government to ensure that the Bank of England could not implement “Britcoin” without legislative backing

article-image

This is the second fee switch proposal that failed to pass a community vote

article-image

This partnership comes as Nike released its first NFT collection, Our Force 1, this month

article-image

The weaknesses of large language models like ChatGPT are “too great to use reliably for security,” OpenZeppelin’s machine learning lead says

article-image

Giddy will now enable users to spend their yield on real-world goods and services