April 17, 2023 at 17:16 GMTModified date: May 15, 2023 at 16:49 GMT
April 17, 2023 at 17:16 GMT

Silk Road Hacker Sentenced as Police Seize 50,000 BTC

The U.S. Department of Justice has announced the sentencing of a Silk Road hacker after authorities seized 51,000 BTC over the past two years.

The U.S. Department of Justice has announced the sentencing of a Silk Road hacker after authorities seized more than 50,000 BTC over the past two years.

In 2012, defendant James Zhong acquired the bitcoins through a scheme that involved triggering more than 140 transactions in rapid succession. This action deceived Silk Road’s withdrawal-processing system into releasing approximately 50,000 bitcoins from its payment system into Zhong’s accounts.

To evade detection, Zhong used a mixer, a foreign cryptocurrency exchange, and an array of sophisticated technological tools to transfer the bitcoins into multiple accounts. He apparently managed to evade police scrutiny for nine years following the hack.

However, in November 2021, police in Gainesville, Georgia executed a search warrant on Zhong’s property. They discovered over 50,000 bitcoins in a single board computer, a Cheetos popcorn tin, and an underground floor safe.

In addition, they found more than $661,000 in cash and 25 Casascius coins, which are physical bitcoins containing a private key to a bitcoin wallet.

After his arrest, Zhong voluntarily handed over additional bitcoins obtained through the fraud scheme.

At the time of the seizure, Zhong’s bitcoin stash was conservatively valued at $3.4 billion, but its current value is around $1.57 billion due to market volatility and the ongoing crypto winter. These estimates are based on the lowest possible price.

Zhong has been sentenced to one year and one day in prison for the 2012 wire fraud.

The sentencing announcement comes as the SEC and FBI seek to expand their crypto teams to combat both individual and institutional crime.

In April, the SEC announced plans to hire three general attorneys in New York, San Francisco, and Washington, D.C., to focus on crypto crime. In February, the FBI and the Justice Department unveiled the National Cryptocurrency Enforcement Team (NCET), a new unit dedicated to investigating suspected criminal activity involving digital assets, with a focus on crypto exchanges and infrastructure companies.

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