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Crime United States Bitcoin

US Attorney Announces $3.36 Billion Crypto Seizure And Conviction In Connection With Silk Road Dark Web Fraud (justice.gov) 58

Posted by msmash from the how-about-that dept.
Department of Justice, announcing through a press release: Damian Williams, the United States Attorney for the Southern District of New York, and Tyler Hatcher, the Special Agent in Charge of the Internal Revenue Service, Criminal Investigation, Los Angeles Field Office ("IRS-CI"), announced today that JAMES ZHONG pled guilty to committing wire fraud in September 2012 when he unlawfully obtained over 50,000 Bitcoin from the Silk Road dark web internet marketplace. ZHONG pled guilty on Friday, November 4, 2022, before United States District Judge Paul G. Gardephe.

On November 9, 2021, pursuant to a judicially authorized premises search warrant of ZHONG's Gainesville, Georgia, house, law enforcement seized approximately 50,676.17851897 Bitcoin, then valued at over $3.36 billion. This seizure was then the largest cryptocurrency seizure in the history of the U.S. Department of Justice and today remains the Department's second largest financial seizure ever. The Government is seeking to forfeit, collectively: approximately 51,680.32473733 Bitcoin; ZHONG's 80% interest in RE&D Investments, LLC, a Memphis-based company with substantial real estate holdings; $661,900 in cash seized from ZHONG's home; and various metals also seized from ZHONG's home.

U.S. Attorney Damian Williams said: "James Zhong committed wire fraud over a decade ago when he stole approximately 50,000 Bitcoin from Silk Road. For almost ten years, the whereabouts of this massive chunk of missing Bitcoin had ballooned into an over $3.3 billion mystery. Thanks to state-of-the-art cryptocurrency tracing and good old-fashioned police work, law enforcement located and recovered this impressive cache of crime proceeds. This case shows that we won't stop following the money, no matter how expertly hidden, even to a circuit board in the bottom of a popcorn tin."
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US Attorney Announces $3.36 Billion Crypto Seizure And Conviction In Connection With Silk Road Dark Web Fraud More

US Attorney Announces $3.36 Billion Crypto Seizure And Conviction In Connection With Silk Road Dark Web Fraud

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  • 'The Government is seeking to forfeit, collectively...'

    What the report should have said is: 'The Government is seeking the forfeit, collectively...' Or is the government deliberately forgoing what it has confiscated ;)

    • 'The Government is seeking to forfeit, collectively...'

      What the report should have said is: 'The Government is seeking the forfeit, collectively...' Or is the government deliberately forgoing what it has confiscated ;)

      It's in the original text from the government. I think the actual meaning of the verb forfeit here is "take away from private ownership and into state ownership" so if you "forfeit" something you lose it. If the government "forfeits" something they gain that thing. I guess we're used to using "forfeit" to mean 'stop having', which is what it does mean for us but the legal meaning is different, more precise and different from "forgo".

  • Anonymous (Score:3, Interesting)

    by Joce640k ( 829181 ) on Monday November 07, 2022 @10:52AM (#63031727) Homepage

    10 years later, huh? So much for Bitcoin being "anonymous" and "untraceable".

    • Re:Anonymous (Score:5, Informative)

      by UnknowingFool ( 672806 ) on Monday November 07, 2022 @11:13AM (#63031835)
      The only people that were pushing "Bitcoin is untraceable" are crypto bro types that do not understand what a ledger is.

      • The only people that were pushing "Bitcoin is untraceable" are crypto bro types that do not understand what a ledger is.

        Almost. There were also crypto bro types preying on people that do not understand what a ledger is.

        • I believe at least some of them were advocating how "untraceable" Bitcoin is and not understand what the ledger is.

      • Re: (Score:2)

        by slazzy ( 864185 )
        True. Anyone that spent even a tiny amount of time researching bitcoin would learn it's the most traceable currency in history. Every transaction from the very first is publicly available to everyone to see and is in fact downloaded to their local computer when they install the full wallet.

    • Yea, so much for it being "anonymous", "untraceable", "made of lightsabers", and "able to summon fire giants"! Because these are things my strawman claimed bitcoin is! Take THAT, strawman!

      • Look at me, I'm pretending that bitcoin wasn't marketed as an anonymous way to buy shit

        FTFY

      • It was an almost universal misunderstanding of people using Silk Road. Wouldn't have been briefly successful if people thought that the drugs and prostitutes they bought are in a permanent public ledger.

    • > So much for Bitcoin being "anonymous" and "untraceable".

      Satoshi's public ledger?

      The math for a private crypto was only figured out last year.

    • Re: (Score:2)

      by NFN_NLN ( 633283 )

      > 10 years later, huh? So much for Bitcoin being "anonymous" and "untraceable".

      I only read the summary. Where did they say the bitcoin ledger exposed the names of people?

    • Some of us have been saying the same thing for years. If you want privacy, look to something like XMR.

  • I just can't believe he didn't sent them into a brain wallet.

  • ZCash (Score:3)

    by BytePusher ( 209961 ) on Monday November 07, 2022 @10:57AM (#63031767) Homepage
    If only there were a cryptographic crypto coin that provided privacy..
    • a bunch of amateurs in a hurry to make a fast buck, you haven't been paying attention.

      Don't get me wrong, you can get away with it for a while. Law enforcement is slow to catch up. But we give them unlimited resources (no one's really defunding the police).

      It took 10 years for them to catch up to this guy. But sure enough they did. And as for these crypto currencies optimized for money laundering, there's bound to be security holes because security is hard and these are "go fast, break things" compa

      • Dude you are the king of bad takes in any crypto thread, I swear.

        It is true that security is hard, but security researchers research, in public, open source blockchain software like Monero, meant to preserve the privacy of sender, recipient, and amount. This is no guarantee of success, of course, but no one has traced that stuff yet, and it is used on the dark web today for drug deals without getting the users traced and raided (as clear chains tend to do, now that chain analysis is good). Is it secure?

        • My point isn't just that security is hard, it's that it's basically impossible against nation states. Their unlimited resources mean they'll always beat you. And the stakes are pretty high here.

          "Who knows if it's secure" doesn't cut it when you're looking at a decade or more in prison if you're an American and death if you're Chinese.

          My point is Crypto isn't a solution to the problem of oppressive nation states, which when you get right down to it what's being proposed here. The only solution there

      • Tracing Bitcoin has always been assumed to be possible and computationally difficult.

        Reversing zero-knowledge proofs is assumed to be impossible because information is destroyed.

        Do you have some brilliant insight on breaking the ZK field? Publish that paper and earn a serious H-index.

        Or just cut out the bullshit.

        • Re: (Score:2)

          by sjames ( 1099 )

          The problem is zero knowledge doesn't prove what needs proving for a crypto currency. Zero knowledge lets me prove I know something and that that something is the same something I knew last time, without revealing that something.

          Alas, that's not useful for a crypto currency that I might want to transfer irrevocably to someone else. If I 'transfer' it, both me and the recipient are able to prove we know it (double spend). If it's used as a chain of custody, now there's an audit trail leading back to me when

    • XMR is better.

  • Keeping Tabs (Score:2, Informative)

    by gregarican ( 694358 )
    Looks like he will need to update his LinkedIn profile [linkedin.com] now...

  • Every criminal assumes (Score:3, Insightful)

    by hdyoung ( 5182939 ) on Monday November 07, 2022 @11:06AM (#63031803)
    they're smarter AND harder working AND more persistent than law enforcement. Nearly all of them find that they're wrong about at least one of those things.

    • they're smarter AND harder working AND more persistent than law enforcement. Nearly all of them find that they're wrong about at least one of those things.

      Plus, law enforcement can make many mistakes and follow bad leads, a criminal just needs to make one; or simply unlucky like the guy caught at Disney World when he and the agent on the case happened to be there at the same time and the agent recognized him. Then there are your associates who might cut a deal if you are the big fish they want.

    • You can be pretty successful if you don’t get greedy or stupid. The original silk road guy was dumb to start advertising it from his personal email. Of course the investigation started after he put a hit on someone. Cops aren’t that smart. Look at how blatant serial killers like Jeffrey Dahmer were.

    • Police found a thumbdrive in the bottom of a a popcorn tin.

      I wouldn't call that smart or high tech. They were probably just hungry and got lucky.

    • Nearly all of them assume that erroneously? I am sorry, wouldn't you need the data on every criminal to make that claim (solved crimes over total crimes would be near one).

      Meanwhile in Chicago, 60% of MURDERS go unsolved.

    • James Caan's character in Thief. He had contempt for the cops that wanted to get paid off, to "benefit from the fruits of his labor" (possibly paraphrasing there), and told them to go out and work for their money.

      Trivia: The real life Donnie Brasco cop, Joseph D. Pistone, wasn't amused by how Caan associated with a real life crew of thieves so as to make the film more authentic, nor was he amused by Governor Mario Cuomo's insistence that there was no Mafia.

    • There's also the fact that the fed has, effectively, unlimited resources. They can essentially brute force your case by throwing as many people, as much time, or as much tech at it as they want
    • that a lot of them got away with it while the FBI was catching up. The problem with this one is that they stole 50k bitcoin 10 years ago when the price wasn't so crazy and because of pump & dump instead of being worth a few million it's now a few billion, making it a juicier target.

      That said, the law is catching up, and they have virtually unlimited resources. Crypto will gradually die out as more and more people are tossed in jail for various crypto adjacent crime. Take away drugs, ransomeware and

  • public database (Score:5, Funny)

    by awwshit ( 6214476 ) on Monday November 07, 2022 @11:09AM (#63031819)

    Ah the joys of public databases.

  • If not, then someone else who has the private key could spend them away today out of the government's captured wallet and into another one controlled by one of James Zhong's allies. That would be very embarrassing for the government to have to announce that they lost them shortly after recovering them.
    • If you dig into the case affidavit from the IRS investigator, he walks through the entire process. Listing all of the wallet ID's and everything. Here is the US government wallet that has most all of the proceeds sitting there now --> https://www.blockonomics.co/#/... [blockonomics.co].

  • wow 50,000 BTC seems excessive (Score:3, Insightful)

    by Robert Goatse ( 984232 ) on Monday November 07, 2022 @11:29AM (#63031883)
    I wonder if he just stole, say 5K, he could have flown under the radar. With 3B in bitcoin, there's no way he could have spent it with folks specifically looking at the transaction chain.

    • Re: (Score:2)

      by pjt33 ( 739471 )

      You appear to be overlooking "in September 2012". When he stole it, it was worth about $650k.

  • Silk Road servers (Score:5, Interesting)

    by gregarican ( 694358 ) on Monday November 07, 2022 @11:29AM (#63031887) Homepage
    Looking closer at the criminal charges and whatnot, it's really interesting. Once Silk Road's servers were seized and dug into then the trail became easier to follow for sure --> https://www.justice.gov/usao-s... [justice.gov]. The withdrawal bug in their code was definitely a hole big enough to drive a Brinks truck through.
  • Bankers good
  • Is it a crime to steal from Silk Road ?
    • Yes. In most cases of theft, ownership is not an issue.
      • Like, who are they going to get to give evidence against him?
        • I didn't say that he would be successfully prosecuted or that anybody would even try. But it's still illegal and there might be some confluence of circumstances (of which, admittedly, I can't think) where one does manage to get into legal trouble.
          • They got him to cop a plee, It would have been interesting seeing it go to court. Who would be their prime witness for the prosecution, Ross Ulbricht /s
  • I've seen that before, using upper case as a legal tool to disassociate from corporate status. Anyone knows?

  • Echoes of An0m? (Score:3)

    by Tony Isaac ( 1301187 ) on Monday November 07, 2022 @02:49PM (#63032823) Homepage

    An0m was touted as an ultra-secure phone that couldn't be tapped by the police. Criminal organizations loved it, not realizing that it was in fact developed by the FBI. In the end, the FBI closed the dragnet, arresting hundreds. https://en.wikipedia.org/wiki/... [wikipedia.org]

    To this day, Bitcoin's inventor remains anonymous. It (an other cryptocurrencies) are also loved by criminal organizations, and it used to be considered untraceable, or at least "private."

    It makes me wonder...is the anonymous inventor of Bitcoin actually employed by the FBI, and the whole thing a ruse to trap criminal enterprises?

    • It makes me wonder...is the anonymous inventor of Bitcoin actually employed by the FBI, and the whole thing a ruse to trap criminal enterprises?

      Short answer: No.

      Longer answer: There was no way for whoever created bitcoin to know that criminal enterprises would use it. What if it was created and for whatever reason they didn't use it at all? What if they found that dealing with real currency was better? What if bitcoin and other cryptocurrencies had somehow had a hugely negative impact on real currencies? I hate the term "fiat currencies" because "fiat" sort of implies that the person who uses it is a nut job Libertarian, but use th

      • It was very obvious from the beginning that criminal enterprises would want to use Bitcoin. It's very premise was privacy and "not controlled by governments." That's just too juicy a fruit for criminals to resist.

        As for worrying about the impact on "real" currencies, the US dollar already has plenty of competition, some serious, from many other currencies around the world. Why should there be worry that a new one would harm it in some special way?

        Only a pitchman who drank his own Kool-aid would think these

  • Great (Score:3)

    by algaeman ( 600564 ) on Monday November 07, 2022 @03:26PM (#63032981)
    Now I have to find a new hiding place for my bitcoin wallet.

    • Yep. Seeing as how "submerged under blankets in a popcorn tin stored in a bathroom closet" has now been ruined as a hiding place.

  • Please dump all of this bitcoin on the market at once. For the lulz.

  • He should have hidden the thumb drive inside a toaster, not a popcorn tin. Then the feds would have had to have high Perception and Toaster Repair skills in addition to Computer Science. Mr. Zhong should have learned this at a young age playing Wasteland.

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