The US Department of Justice has announced the conviction of James Zhong, the mysterious hacker who stole 50,000 bitcoins from the Silk Road dark web. On Friday, November 4, Zhong pleaded guilty to money laundering charges for exploiting a “withdrawal error” that allowed him to withdraw much more bitcoin than he deposited on the darknet.

The DOJ notice also details the seizure of 51,351.9 bitcoins, valued at more than $3.3 billion, during the operation, which took place in November 2021.

James Zhong was once a member of the notorious Silk Road dark web marketplace, a now defunct illicit goods marketplace that operated with over 100,000 members between 2011 and 2013. As the defendant admitted, he stole 50,000 bitcoins from Silk Road in September 2012, exploiting a flaw in the market’s trading system.

Zhong funded nine different accounts with an initial deposit of between 200 and 2,000 bitcoins, and then initiated 140 withdrawals in quick succession. The hacker took advantage of a delay in the market’s trading system that allowed someone to withdraw their own escrow deposit multiple times.

In this way, Zhong tricked the system into releasing 50,000 bitcoins and then moved them to different wallets to hide the money trail. After dividing Bitcoin into Bitcoin Cash and Bitcoin SV in 2017, Zhong received 50,000 Bitcoin Cash. Bitcoin Cash was converted to 3,500 Bitcoins and Zhong’s total reached 53,500 Silk Road related Bitcoins.

“For nearly a decade, the whereabouts of this huge pile of lost bitcoins, worth more than $3.3 billion, has become a mystery,” said US Attorney Damian Williams. “Thanks to cutting-edge cryptocurrency monitoring and old-fashioned policing, law enforcement found and captured these impressive proceeds of crime.”

The Justice Department’s announcement today explains that the seizure occurred on November 9, 2021, when law enforcement with a search warrant discovered Zhong’s home:

• 50,491 bitcoins stored on a single-board computer buried under blankets in a basement safe and a popcorn box in the bathroom cabinet.
• 11.12 Bitcoin
• $661,900 cash
• 25 Casascius coins worth 174 Bitcoins (physical Bitcoin)
• Four 1 oz silver bars
• Four 10 oz silver bars
• Three gold bars of 1 ounce each
• one gold coin

In addition to the above, the cybercriminal also seized all assets, including real estate investments and additional digital assets unrelated to criminal proceedings. In March 2022, Zhong voluntarily delivered another 825.4 bitcoins to the authorities, and in May 2022 another 35.5 bitcoins. Zhong is scheduled to serve a maximum 20-year prison sentence for fraud on February 22, 2023. Source