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Conviction Announced in Seizure of 50,676 BTC Stolen from Silk Road in 2012

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Despite dating back to 2012, we are still seeing individuals prosecuted, and assets seized, stemming from charges involving Silk Road.  The most recent example of which was just announced by the United States Department of Justice (USDOJ).

Details of the Seizure

While this latest seizure technically took place in November of 2021, the charges surrounding them and defendant James Zhong have only now been settled.  Interestingly, rather than a result of activity within Silk Road, this particular seizure took place when an individual was believed to have stolen FROM the marketplace.

U.S. Attorney Damian Williams states, “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.”

Due to a lingering decline in digital asset value, the seized BTC – which the USDOJ indicates was valued at $3.36B in Nov. 2021 – is now worth roughly $1.04B.  In addition to the digital assets, the following items were also seized at the time.

  • various metals
  • $661,900 USD

The defendant (Zhong) pled guilty to charges stemming from the aforementioned theft and wire fraud on Nov 4th, 2022.

What was Silk Road?

In 2012, digital assets were in their infancy.  There were not thousands of assets on offer, and there were only a handful of well-known exchanges.  It was also a period in time where digital assets were known to go hand-in-hand with nefarious activity – a reputation the sector has worked hard to shed over the years.  Much of this reputation was built as a result of illegal marketplaces like ‘Silk Road', as BTC was a popular means of supported payment.

Due to its affiliation with the dark web and acceptance of BTC for services/items for sale, Silk Road has since become infamous within the digital asset sector.

An Elaborate Scheme

The events which resulted in this seizure of BTC were a well thought out scheme concocted by James Zhong.  The United States Department of Justice (USDOJ) broke down how exactly he was able to steal from Silk Road.

“In September 2012, ZHONG executed a scheme to defraud Silk Road of its money and property by (a) creating a string of approximately nine Silk Road accounts (the “Fraud Accounts”) in a manner designed to conceal his identity; (b) triggering over 140 transactions in rapid succession in order to trick Silk Road’s withdrawal-processing system into releasing approximately 50,000 Bitcoin from its Bitcoin-based payment system into ZHONG’s accounts; and (c) transferring this Bitcoin into a variety of separate addresses also under ZHONG’s control, all in a manner designed to prevent detection, conceal his identity and ownership, and obfuscate the Bitcoin’s source. “

Intense Focus

With this most recent news, it further underscores what is a continuing and intense focus on digital assets by the United States Department of Justice (USDOJ). Despite occurring a decade ago, its relentless pursuit for this stolen BTC has finally yielded a result.

In its release, the USDOJ indicated that time will not stop it from doing its job, stating, “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.”