U.S. Department of Justice: A Hacker Has Been Arrested For Stealing 50,676 Bitcoins

The U.S. Department of Justice announced that it had seized approximately $3.36 billion worth of stolen bitcoin at the time during a 2021 raid on the residence of cryptocurrency investor James Zhong.

On Friday, 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 Nov. 9, 2021, during a search of James Zhong’s Gainesville, Georgia, home, they seized about 50,676 bitcoins, worth more than $3.36 billion at the time.

This is the U.S. Department of Justice’s second-largest cryptocurrency seizure 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.

It is reported that James Zhong stole Bitcoin from the illegal darknet forum Silk Road (Silk Road) . Silk Road was launched in 2011 but was shut down by the US FBI in 2013, and its founder, Ross William Ulbricht, is currently serving a sentence in prison.

"The whereabouts of the stolen bitcoins have become a mystery worth more than $3.3 billion for nearly a decade," U.S. Attorney Damian Williams said.

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 that James Zhong used a "very sophisticated strategy" to steal bitcoin 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 made more than 140 transactions in rapid succession, tricking the market's withdrawal processing system, releasing roughly 50,000 bitcoins into his account. James Zhong then moved the bitcoins to various wallet addresses under his control.

Public records show James Zhong is the president and chief executive of JZ Capital LLC, a startup company registered in Georgia in 2014. According to his LinkedIn profile, James Zhong's work focuses on "investment and venture capital".

The profile also shows that James Zhong is a "large early investor in Bitcoin with a solid understanding of Bitcoin's inner workings" and has software development experience in computer programming languages. James Zhong's social media profiles include photos of him on yachts, in front of planes and at football games.

But these types of hacks didn’t end with the demise of Silk Road, and cryptocurrency platforms remain vulnerable to criminals.

In October 2022, Binance, the world’s largest cryptocurrency exchange by trading volume, was hacked, causing a loss of $570 million. A vulnerability in the smart contract allowed hackers to exploit the cross-chain bridge BSC Token Hub, which as a result could allow hackers to withdraw the native cryptocurrency BNB on the platform, the company said.

In March 2022, another hacker discovered a vulnerability in the decentralized finance platform Ronin Network, stealing more than $600 million worth of cryptocurrency.

As of July 2022, a total of $1.9 billion worth of cryptocurrency has been stolen from hacking services this year, compared with nearly $1.2 billion in the same period in 2021, according to a report published by blockchain analysis firm Chainalysis.