Manhattan prosecutors say they seized almost $3.4 billion in Bitcoin from a property developer who scammed the dark web marketplace Silk Road over a decade ago.
In what's now the second-largest crypto seizure for the Department of Justice, investigators discovered more than 50,000 Bitcoin in the home of Georgia resident James Zhong in a raid carried out in November 2021.
Zhong, a 32-year-old computer science graduate, was arrested and pleaded guilty to wire fraud last week.
Silk Road Missing Coins
The raid was carried out as part of an investigation led by the U.S. Attorney's office in Manhattan into the whereabouts of thousands of missing coins traceable to Silk Road founder Ross Ulbricht. At the time of the seizure, Bitcoin traded at over $60,000, boosting the value of the loot for prosecutors by billions of dollars. The digital currency now trades at about $21,000.
Zhong's offenses date back to 2012 when he defrauded Silk Road, an online marketplace notorious for the trading of drugs and cryptocurrency, out of more than 53,000 Bitcoin.
He created a string of Silk Road accounts to conceal his identity and triggered 140 transactions in quick succession to trick the platform into releasing Bitcoin into those accounts, according to court filings. Zhong then transferred the digital currency into other accounts under his control.
"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 in a statement. "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."
Prosecutors say 50,000 Bitcoin were found in an underground safe and a single-board computer in a popcorn tin under a pile of blankets in Zhong's bathroom closet.
He has subsequently surrendered over 1,000 more Bitcoin, and has agreed to help prosecutors access the remaining coins and provide the technical assistance to do so.
Zhong's attorney Michael Bachner said his client had returned "virtually all of the Bitcoin he improperly acquired."
"Mr. Zhong pleaded guilty to conduct that occurred over 10 years ago when he was just 22 years old," Bachner said in a statement. "Given the increase in Bitcoin value over the last decade, the value of the Bitcoin he returned exponentially exceeded the value of the Bitcoin he took."
The coins he stole were proceeds stemming from Ulbricht's crimes, so there's no victim restitution for Zhong to pay, according to Zhong's plea agreement.
