James Zhong pleaded guilty to wire fraud on Friday after illegally obtaining more than 50,000 bitcoin from the Silk Road dark web marketplace, the U.S. Department of Justice (DOJ) reported on Monday. In conjunction with the case, the Justice Department also revealed a “record $3.36 billion cryptocurrency seizure.”
The DOJ elaborated that on November 9, 2021, government officials searched Zhong’s home in Gainesville, Georgia, and “seized about 50,676.17851897 bitcoin, then valued at over $3.36 billion”
“This seizure was then the largest cryptocurrency seizure in the history of the U.S. Department of Justice and today remains the department’s second-largest financial seizure ever.”
Zhong also had an additional 3,500 bitcoins after converting 50,000 bitcoin cash (BCH) into BTC after the bitcoin network hard fork in August 2017. He converted the cryptocurrency using a foreign exchange.
Zhong began “voluntarily submitting to the government extra bitcoin” in March of this year in addition to the BTC that was taken at his home, the DOJ said, adding that “In total, Zhong voluntarily surrendered 1,004.14621836 additional bitcoin.”
According to the DOJ, the agency is requesting the forfeiture of “about 51,680.32473733 bitcoin.” BTC is currently worth $20,641.28 at the time of writing, thus the government is asking for nearly $1.07 billion.
Zhong’s Silk Road Marketplace Fraud Scheme
According to the DOJ, Zhong carried out a conspiracy to steal money and property from the Silk Road marketplace in September 2012, and he “was able to extract many times more bitcoin out of Silk Road than he had put in the first instance.” The Justice Department, for instance, explained the following on September 19, 2012:
Zhong deposited 500 bitcoin into a Silk Road wallet. Less than five seconds after making the initial deposit, Zhong executed five withdrawals of 500 bitcoin in rapid succession — i.e., within the same second — resulting in a net gain of 2,000 bitcoin.
In the case of United States v. Ross Ulbricht, the U.S. government filed an Amended Preliminary Order of Forfeiture on Monday in an effort to forfeit 51,351.89785803 bitcoin that can be linked to Silk Road and was worth about $3,388,817,011.90 at the time of seizure. Ross Ulbricht, the creator of Silk Road, was found guilty in 2015 and is currently incarcerated for a total of 40 years without the possibility of parole.
A Consent Preliminary Order of Forfeiture for 154.4268793000044 BTC, $661,900 in cash, 25 Casascius coins (physical bitcoin) worth about 174 BTC, various metals, and Zhong’s 80% stake in Memphis-based RE&D Investments LLC was also made by U.S. District Judge Paul Gardephe on Friday. Four one-ounce silver bars, three one-ounce gold bars, four 10-ounce silver bars, and one gold coin made up the metals collected, according to the Justice Department.
Social media users started noticing that one of Zhong’s BTC addresses mentioned in a court filing corresponds to one uploaded by Bitcointalk user “Loaded” after the DOJ made its announcement. “In March 2017, Bitcointalk user ‘Loaded’ signed a post from an address with 40,000 bitcoin, requesting to perform a 1:1 swap for ‘Bitcoin Unlimited’ with Roger Ver,” wrote Bitmex Research in a tweet. These monies now appear to have been seized by American authorities.
The creator of Bitcoin.com, Ver, commented on Loaded’s Bitcointalk post by saying, “As I recall, he never replied to my DMs about placing the bet.”
