On Monday, November 8, local time, the U.S. Department of Justice announced that approximately $3.36 billion worth of stolen bitcoin at the time was seized in a 2021 raid on the residence of cryptocurrency investor James Zhong.
On Friday, local U.S. time, James Zhong pleaded guilty to wire fraud in September 2012 and could be sentenced to up to 20 years in prison. The U.S. Department of Justice said that on November 9, 2021, during a search of James Zhong’s residence in Gainesville, Georgia, they seized approximately 50,676 bitcoins, worth more than $3.36 billion at the time.
This is the second largest cryptocurrency seizure by the U.S. Department of Justice to date, after the agency announced in February that they had seized $3.6 billion in stolen cryptocurrency related to the 2016 hack of cryptocurrency exchange Bitfinex.
James Zhong reportedly stole bitcoins from the illegal dark web forum Silk Road. Silk Road was launched in 2011, but was shut down by the U.S. FBI in 2013, and its founder, Ross William Ulbricht, is currently serving a prison sentence.
U.S. Attorney Damian Williams said, “The whereabouts of the stolen bitcoins have been a mystery worth more than $3.3 billion for nearly a decade.”
James Zhong is said to have used the Silk Road vulnerability to launch the hack. Tyler Hatcher, special agent in charge of the IRS criminal investigation, said James Zhong used a “very sophisticated strategy” to steal bitcoins from Silk Road.
Hatcher revealed that in September 2012, James Zhong created nine fraudulent accounts on Silk Road, each with anywhere from 200 to 2,000 bitcoins. He then quickly conducted more than 140 consecutive transactions, spoofing the marketplace’s withdrawal processing system and releasing approximately 50,000 bitcoins into his accounts. James Zhong then transferred bitcoins to various wallet addresses under his control.
Public records show that James Zhong is the president and CEO of JZ Capital LLC, a self-starting company that was incorporated in Georgia in 2014. A profile on LinkedIn, a professional networking site, shows James Zhong’s focus is on “investments and venture capital.
James Zhong’s social media profiles include photos of him on yachts, in front of airplanes, and at soccer games.
But these types of hacks didn’t end with the demise of Silk Road, and cryptocurrency platforms remain vulnerable to criminal attacks.
In October 2022, Binance, the world’s most traded cryptocurrency exchange, suffered a hack that cost $570 million. The company said a vulnerability in the smart contract allowed hackers to exploit the cross-chain web bridge BSC Token Hub, which as a result allowed hackers to withdraw the local cryptocurrency BNB on the platform.
In March 2022, another hacker discovered a vulnerability in the decentralized financial platform Ronin Network, stealing more than $600 million worth of cryptocurrency.
Blockchain analytics firm Chainalysis published a report showing that a total of $1.9 billion worth of cryptocurrency was stolen in hacking services this year as of July 2022, compared to close to $1.2 billion for the same period in 2021.