Steve Will Do It Bitcoin Stolen

NOWHERE TO Hide —

Hacker took pains to hibernate $3.36B of stolen bitcoin. Feds found it anyway

The booty, the second biggest in DOJ history, shows the difficulty of hiding cryptocurrency.

Bitcoin laundering concept vector illustration.

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Bitcoin laundering concept vector illustration.


Federal prosecutors accept recovered $three.36 billion in bitcoin that was stolen a decade ago from Silk Road, the nighttime web boutique responsible for distributing massive quantities of illegal drugs and other illicit goods and services to people worldwide.

Last November, federal agents executing a search warrant on a then-defendant’southward Gainesville, Georgia, business firm seized a little more than than fifty,491 bitcoin that was stashed in an hush-hush floor condom and on a “single-board figurer” that was submerged under blankets in a popcorn tin stored in a bathroom closet, the Justice Department said on Monday. During the aforementioned search, agents recovered $661,900 in cash, 25 Casascius coins (physical bitcoin) with an approximate value of 174 bitcoin, xi.1160005300044 additional bitcoin, and iv one-ounce silver-colored bars, three one-ounce gold-colored bars, four 10-ounce silver-colored confined, and i gold-colored money.

A $iii.iii billion mystery

At the fourth dimension, the booty was the biggest cryptocurrency seizure in United states Justice Section history and today remains the department’s second-largest fiscal seizure e’er, behind a ​​$3.6 billion seizure prosecutors fabricated before this year from a married couple charged with money laundering.

The $three.36 billion belonged to James Zhong, 32, of Gainesville and Athens, Georgia. On Friday, Zhong pled guilty to one count of wire fraud, an crime that carries a maximum judgement of twenty years in prison.

“James Zhong committed wire fraud over a decade ago when he stole approximately 50,000 bitcoin from Silk Route,” Damian Williams, US Attorney for the Southern Commune of New York, said in Monday’s release. “For almost x years, the whereabouts of this massive chunk of missing bitcoin had ballooned into an over $3.3 billion mystery. Thanks to land-of-the-art cryptocurrency tracing and expert old-fashioned law work, law enforcement located and recovered this impressive enshroud of crime proceeds.”

Prosecutors said Zhong executed a sophisticated scheme to defraud Silk Route of what was nearly $650,000 worth of bitcoin, based on the value of the cryptocurrency when the fraud took identify in September 2012. To execute the program, prosecutors said Zhong created near 9 Silk Road accounts and funded them with an initial deposit of 200 to 2,000 bitcoin. Zhong and then triggered 140 transactions in rapid succession to trick the Silk Road withdrawal-processing organization into releasing most 50,000 bitcoin into the accounts.

“Equally an case, on September 19, 2012, Zhong deposited 500 bitcoin into a Silk Road wallet,” prosecutors said. “Less than five seconds afterward making the initial deposit, Zhong executed five withdrawals of 500 bitcoin in rapid succession—i.e., within the aforementioned 2d—resulting in a net gain of 2,000 bitcoin.”

One of Zhong’s other fraud accounts fabricated a unmarried deposit and more than 50 withdrawals before the business relationship ceased its activity. Within a few days of the transactions, Zhong moved the bitcoin out of Silk Road and consolidated them into two high-value amounts.

When bitcoin performed a hard fork coin split in August 2017, Zhong’s 50,000 bitcoin windfall received a matching number of bitcoin cash coins. Zhong used an overseas substitution to convert the bitcoin cash to about 3,500 bitcoin, bringing his total have to roughly 53,500 bitcoin.

Starting before this yr, Zhong started voluntarily surrendering a little more than 1,004 bitcoin to federal authorities.

Silk Road operated from 2011 to 2013 and was used to trade illicit goods around the earth. The platform’s founder, Ross Ulbricht, was sentenced to life in prison in 2015.

IRS Criminal Investigation Special Amanuensis in Charge Tyler Hatcher said that once Zhong completed the heist, “he attempted to hide his spoils through a series of complex transactions which he hoped would be enhanced as he hid backside the mystery of the ‘darknet.’” In reality, the bitcoin blockchain provides a history of every unmarried transaction, which forensic investigators can employ to trace stolen coins fifty-fifty when they laissez passer through tumblers and other tools designed to obscure their origins.

Fifty-fifty cryptocurrencies with stronger privacy assurances, however, aren’t automatically safe from government seizures. Some of the $3.6 billion recovered in March, for example, was in the form of monero, a cryptocurrency designed to obfuscate the trails of funds inside its blockchain by mixing up the payments of multiple users. Using techniques that yet aren’t articulate, the IRS was able to recover the monero funds anyway.

Zhong is scheduled to be sentenced on Feb 22, 2023.

Source: https://arstechnica.com/information-technology/2022/11/feds-seize-3-36-billion-in-bitcoin-stolen-10-years-ago-in-hack-of-silk-road/

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