The US Department of Justice today announced the sentencing of James Zhong, a hacker who stole 50,000 bitcoins from the darknet marketplace “Silk Road.”.
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On Friday, November 4, Zhong pleaded guilty to money laundering crimes for exploiting a “withdrawal processing flaw” that allowed him to withdraw far more Bitcoin than he deposited on the dark net market.
In November 2021, the Department of Justice seized 51,351.9 Bitcoin, worth over $3.3 billion at the time.
James Zhong was once a member of Silk Road, an illegal dark net that operated between 2011 and 2013. Over 100,000 people were members of this marketplace.
The defendant confessed that, in September 2012, he exploited a flaw in Silk Road's trading system to steal 50,000 bitcoins from the site.
Zhong quickly deposited between 200 and 2,000 bitcoins into nine different accounts and then almost immediately withdrew 140 bitcoins from the same accounts.
Exploiting a flaw in the market's trading system, the hacker managed to withdraw their escrow multiple times.
Zhong used this method to trick the system and free up 50,000 bitcoins. He then moved the money to various wallets to make it harder to trace.
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In 2017, after Bitcoin split into Bitcoin Cash and Bitcoin SV, Zhong received 50,000 Bitcoin Cash. He then converted them into 3,500 Bitcoin, which brought the total amount of bitcoins associated with Silk Road to 53,500.
The Department of Justice today issued a statement regarding the seizure that took place on November 9, 2021. According to the warrant, law enforcement authorities found the following at Zhong's residence:
- Approximately 50,491 Bitcoins hidden in a basement floor safe, in a single-board computer that was submerged under blankets in a popcorn box inside a bathroom closet.
- 11.12 Bitcoin
- $661,900 in cash
- 25 Casascius coins (physical Bitcoin) worth 174 Bitcoin
- Four 1-ounce silver bars
- Four 10-ounce silver bars
- Three 1-ounce gold bars
- A gold coin
In addition to the above, all of the hacker's assets were also seized, including real estate investments and digital assets unrelated to his criminal activity.
In March 2022, Zhong voluntarily handed over an additional 825.4 Bitcoins to authorities and in May 2022, he handed over another 35.5 Bitcoins.
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Zhong's maximum sentence for wire fraud is 20 years in prison, and his hearing is scheduled for February 22, 2023.
Information source: bleepingcomputer.com
