The crypto market has been battered this yr, with nearly $2 trillion wiped off its value since its peak.
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The U.S. Department of Justice announced Monday that it seized about $3.36 billion in stolen bitcoin during a previously unannounced 2021 raid on the residence of James Zhong.
Zhong pleaded guilty Friday to 1 count of wire fraud, which carries a maximum sentence of 20 years in prison.
U.S. authorities seized about 50,676 bitcoin, then valued at over $3.36 billion, from Zhong during a search of his house in Gainesville, Georgia, on Nov. 9, 2021, the DOJ said. It’s the DOJ’s second-largest financial seizure thus far, following its seizure of $3.6 billion in allegedly stolen cryptocurrency linked to the 2016 hack of the crypto exchange Bitfinex, which the DOJ announced in February.
In response to authorities, Zhong stole bitcoin from the illegal Silk Road marketplace, a dark web forum on which drugs and other illicit products were bought and sold with cryptocurrency. Silk Road was launched in 2011, however the Federal Bureau of Investigation shut it down in 2013. Its founder, Ross William Ulbricht, is now serving a life sentence in prison.
“For nearly ten years, the whereabouts of this massive chunk of missing Bitcoin had ballooned into an over $3.3 billion mystery,” U.S. Attorney Damian Williams said in a press release.
In response to the Southern District of Latest York, Zhong took advantage of the marketplace’s vulnerabilities to execute the hack.
Special Agent in Charge Tyler Hatcher, of the Internal Revenue Service – Criminal Investigation, said Zhong used a “sophisticated scheme” to steal the bitcoin from Silk Road. In response to the press release, in September 2012, Zhong created nine fraudulent accounts on Silk Road, funding each with between 200 and a couple of,000 bitcoin. He then triggered over 140 transactions in rapid succession, which tricked the marketplace’s withdrawal-processing system to release roughly 50,000 bitcoin into his accounts. Zhong then transferred the bitcoin into quite a lot of wallet addresses all under his control.
Through blockchain evaluation and good old-fashioned police work, law enforcement and blockchain analytic experts was capable of recuperate greater than 50,000 bitcoin from Zhong. They even uncovered crypto stored on a pc submerged under blankets in a popcorn tin in a toilet closet, in response to the press release.
Public records show Zhong was the president and CEO of a self-created company, JZ Capital LLC, which he registered in Georgia in 2014. In response to his LinkedIn profile, his work there focused on “investments and enterprise capital.”
His profile also states he was a “large early bitcoin investor with extensive knowledge of its inner workings” and that he had software development experience in computer programming languages.
Zhong’s social media profiles include pictures of him on yachts, in front of airplanes, and at high-profile football games.
But a majority of these hacks didn’t end with the Silk Road’s demise. Crypto platforms proceed to be vulnerable to criminals.
In October 2022, Binance, the world’s largest crypto exchange by trading volume, suffered a $570 million hack. The corporate said a bug in a sensible contract enabled hackers to take advantage of a cross-chain bridge, BSC Token Hub. Because of this, the hackers withdrew the platform’s native cryptocurrency, called BNB tokens.
In March 2022, a special hacker found vulnerabilities within the decentralized finance platform Ronin Network and made off with greater than $600 million — the biggest hack thus far. The private keys, which function passwords to guard cryptocurrency funds in wallets, were compromised.
In response to a Chainalysis report, $1.9 billion price of cryptocurrency had been stolen in hacks of services through July 2022, compared with just below $1.2 billion at the identical point in 2021.Â
