On Monday, The U.S. Department of Justice –DOJ– notified that James Zhong pleaded guilty on Friday to committing wire fraud in September 2012 when he unlawfully acquired over 50,000 Bitcoin from the Silk Road dark web internet marketplace.
The Justice Department also disclosed a historic $3.36 billion cryptocurrency seizure in association with the case.
The DOJ explained that law enforcement completed a search at Zhong’s house in Gainesville, Georgia, on Nov. 9, 2021, and held about 50,676.17851897 bitcoin, then valued at over $3.36 billion, elaborating that this seizure was then the biggest cryptocurrency seizure in the history of the U.S. Department of Justice and today stays the department’s second-largest financial seizure ever.
Zhong also had about 3,500 additional bitcoins from exchanging into BTC over 50,000 bitcoin cash (BCH) which he obtained following the bitcoin blockchain hard fork back in August 2017. He used an overseas cryptocurrency exchange for the conversion.
The DOJ also revealed that after the BTC was grabbed at his house, Zhong started voluntarily surrendering to the government additional bitcoin beginning in March this year, adding that in total, Zhong voluntarily surrendered 1,004.14621836 extra bitcoin. The government is seeking the deprivation of approximately 51,680.32473733 bitcoin.
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DOJs’ Insights into Zhong’s Plot to Cheat Silk Road Marketplace
Zhong plotted a scheme to cheat the Silk Road marketplace of its money and property in September 2012, the DOJ stated, adding that he was able to withdraw many times more bitcoin out of Silk Road than he had deposited in the first place.
For instance, the Justice Department described that on Sept. 19, 2012:
Zhong deposited about 500 bitcoin into a Silk Road wallet. Less than 5 seconds after making the initial deposit, Zhong completed 5 withdrawals of 500 bitcoin in quick succession — i.e., within the same second — resulting in a net profit of 2,000 bitcoin.
On Monday, the United States government filed an Amended Preliminary Order of Forfeiture in the United States v. Ross Ulbricht case seeking to forfeit roughly 51,351.89785803 bitcoin traceable to Silk Road, valued at about $3,388,817,011.90 at the time of seizure.
Silk Road’s founder, Ross Ulbricht, was convicted back in 2015 and is presently doing a double life sentence, plus 40 years without parole.
U.S. District Judge Paul Gardephe also joined a Consent Preliminary Order of Forfeiture on Friday for 154.4268793000044 BTC, $661,900 in cash, 25 Casascius coins (physical bitcoin) worth about 174 BTC, different metals, and Zhong’s 80% interest in Memphis-based RE&D Investments LLC. The metals captured consisted of 4 one-ounce silver-colored bars, 3 one-ounce gold-colored bars, four 10-ounce silver-colored bars, and one gold-colored coin.
Following this notification, some people on social media started noticing that one of Zhong’s BTC addresses publicized in a court document matches one posted by Bitcointalk user “Loaded.”
Bitmex Research tweeted:
The police await the sentencing and Zhong may face 20 years of prison for the crime.
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