U.S. DoJ Seizes $3.36 Billion Worth of Bitcoins Stolen from Silk Road Marketplace

On Monday, November 7, the U.S. Department of Justice (DoJ) publicly announced that they Bitcoins worth $3.36 billion stolen from the Silk Road marketplace. The announcement comes one year after the DoJ conducted the actual raid on the residence of James Zhong.

Last Friday, Zhong pleaded guilty of the theft and admitted to conducting a wire fraud. As per the report, DoJ seized a total of 50,676 Bitcoins that Zhong stole from the darkness marketplace Silk Road. The total value of these Bitcoins has, however, reduced to $1.1 billion due to the strong price correction this year.

This is the second-largest crypto seizure by the Department of Justice, the largest being the seizure of 70,000 Bitcoins earlier this year in February in relation to the hack at crypto exchange Bitfinex.

For years before the ban, Silk Road functioned as a darkness marketplace that would allow he transaction of drugs and other illicit products purchased against cryptocurrencies. Zhong used a wide range of fake account to trick Silk Roads payments processor into giving him the Bitcoins.

The U.S. DoJ traced Zhong’s Bitcoins belonging to an address in in Georgia. They found a bulk of the bitcoin in 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”. Apart from Bitcoins, they also recovered $600,000 in cash and bars of other precious metals.

In an official statement, U.S. 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.”

The report explains how Zhong funded fraud accounts with a few Bitcoins and then quickly executed a series of withdrawals. The DoJ said that through his tricks Zhong was able to withdraw many more times then what he deposited into the Sil Road wallets.

Furthermore, the report also explains that Zhong received a massive chunk of Bitcoin Cash (BCH) during the Bitcoin hardfork in August 2017. He then exchanged all these Bitcoin Cash tokens through an overseas exchange and also received 3,500 additional Bitcoins.

Amid pleading guilty to a wire fraud, Zhong is liable for a sentence to the maximum of 20 years.