US Targets $1 Billion In Stolen Silk Road Bitcoin

The United States is now seeking the forfeiture of over $1 billion in Bitcoin stolen from the Silk Road online marketplace, according to federal prosecutors in Manhattan.

In the second-biggest seizure in U.S. Department of Justice history, Internal Revenue Service (IRS) agents took hold of the 50,000 Bitcoin in a November 2021 search of the defendant James Zhong’s home in Gainesville, Georgia.

Zhong, 32, on November 4 pleaded guilty to wire fraud for tricking Silk Road’s processing network into releasing funds into his account in 2012.

By the time it was seized, the Bitcoin was worth over $3 billion. Since then, it has lost nearly 67% of its value.

Some of the stolen Bitcoin was found on a computer in a popcorn tin stored in a bathroom closet, as highlighted by IRS special agent Trevor McAleenan in an affidavit.

U.S. Attorney Damian Williams in Manhattan said in a statement:

“For almost 10 years, the whereabouts of this massive chunk of missing Bitcoin had ballooned into an over $3.3 billion mystery. We won’t stop following the money … even to a circuit board in the bottom of a popcorn tin.”

The United States government Seized Silk Road in 2013, terming the underground website as a huge illicit drug and money-laundering marketplace. In 2015, Silk Road creator Ross Ulbricht was convicted. He was charged with seven counts of enabling illegal drug sales through Bitcoin. He was sentenced to life in prison, and lost an appeal in 2017.

Zhong might face 27 to 33 months in prison under the recommended federal guidelines at his February 22, 2023 sentencing before US District Judge Paul Gardephe. But, prosecutors can seek a longer sentence.

The defendant also agreed to forfeit his stake in a real estate firm, $661,900 and other items. His lawyer Michael Bachner said Zhong has returned “virtually” all of the stolen Bitcoin. Bachner said in a statement:

“Mr. Zhong is extremely remorseful for his conduct that occurred over 10 years ago when he was just 22.”