Justice Department Announces Seizure of Bitcoin Once Valued at $3.36 Billion

The department earlier this year said it had seized $3.6 billion of digital currency stolen during the 2016 hack of the Bitfinex cryptocurrency exchange.

In connection with the seizure,

James Zhong,

32 years old, of Georgia pleaded guilty on Friday to one count of wire fraud for stealing more than 50,000 bitcoin in 2012 from Silk Road, the now-defunct online dark web marketplace that sold illegal drugs and other illicit goods and services. Mr. Zhong is set to be sentenced in February.

“For almost 10 years, the whereabouts of this massive chunk of missing bitcoin had ballooned into an over $3.3 billion mystery,” said

Damian Williams,

the U.S. attorney for the Southern District of New York. “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.”

Michael Bachner,

a lawyer for Mr. Zhong, said his client was remorseful for conduct that occurred when he was just 22 years old. “Mr. Zhong returned virtually all of the bitcoin he improperly acquired,” said Mr. Bachner. “Ironically, given the increase in bitcoin value over the last decade, the value of the bitcoin he returned exponentially exceeded the value of the bitcoin he took.” 

Prosecutors said that in 2012, Mr. Zhong created fraudulent Silk Road accounts and triggered more than 140 transactions to trick the marketplace’s system into releasing cryptocurrency into his account. He then transferred the bitcoin into accounts he controlled to hide his ownership and its source, according to prosecutors.

In November 2021, law-enforcement officials executed a search warrant at Mr. Zhong’s home in Gainesville, Ga., prosecutors said. They seized more than 50,676 bitcoin, which was then valued at over $3.36 billion.  

Law enforcement found the bulk of the bitcoin in an underground floor safe and on a single-board computer hidden under blankets in a popcorn tin stored in a bathroom closet, prosecutors said. They said they also found cash and silver- and gold-colored bars.

Samson Enzer,

a former Manhattan federal prosecutor, said the technology for tracing funds on the blockchain had become much more advanced than it was years ago.

“This demonstrates that there are ongoing investigations by the DOJ to trace back, locate and seize tainted proceeds even from historic legacy cases,” said Mr. Enzer, now at firm Cahill Gordon & Reindel LLP.

Ross Ulbricht,

the Silk Road founder, was convicted of running the marketplace in 2015 and sentenced to life in prison.

Write to Corinne Ramey at [email protected]