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Feds announce seizure of $3.36 billion in bitcoin stolen a decade in the past from unlawful Silk Street market—the second-largest crypto restoration

The crypto market has been battered this yr, with almost $2 trillion wiped off its worth since its peak.

Jonathan Raa | Nurphoto | Getty Photos

The U.S. Division of Justice introduced Monday that it seized about $3.36 billion in stolen bitcoin throughout a beforehand unannounced 2021 raid on the residence of James Zhong.

Zhong pleaded responsible Friday to at least one depend of wire fraud, which carries a most sentence of 20 years in jail.

U.S. authorities seized about 50,676 bitcoin, then valued at over $3.36 billion, from Zhong throughout a search of his home in Gainesville, Georgia, on Nov. 9, 2021, the DOJ stated. It’s the DOJ’s second-largest monetary seizure up to now, following its seizure of $3.6 billion in allegedly stolen cryptocurrency linked to the 2016 hack of the crypto alternate Bitfinex, which the DOJ introduced in February.

In line with authorities, Zhong stole bitcoin from the unlawful Silk Street market, a darkish internet discussion board on which medication and different illicit merchandise have been purchased and bought with cryptocurrency. Silk Street was launched in 2011, however the Federal Bureau of Investigation shut it down in 2013. Its founder, Ross William Ulbricht, is now serving a life sentence in jail.

“For nearly ten years, the whereabouts of this large chunk of lacking Bitcoin had ballooned into an over $3.Three billion thriller,” U.S. Legal professional Damian Williams stated in a press launch.

In line with the Southern District of New York, Zhong took benefit of {the marketplace}’s vulnerabilities to execute the hack.

Particular Agent in Cost Tyler Hatcher, of the Inner Income Service – Legal Investigation, stated Zhong used a “refined scheme” to steal the bitcoin from Silk Street. In line with the press launch, in September 2012, Zhong created 9 fraudulent accounts on Silk Street, funding every with between 200 and a couple of,000 bitcoin. He then triggered over 140 transactions in speedy succession, which tricked {the marketplace}’s withdrawal-processing system to launch roughly 50,000 bitcoin into his accounts. Zhong then transferred the bitcoin into quite a lot of pockets addresses all below his management.

Public data present Zhong was the president and CEO of a self-created firm, JZ Capital LLC, which he registered in Georgia in 2014. In line with his LinkedIn profile, his work there centered on “investments and enterprise capital.”

His profile additionally states he was a “massive early bitcoin investor with in depth data of its interior workings” and that he had software program improvement expertise in laptop programming languages.

Zhong’s social media profiles embrace footage of him on yachts, in entrance of airplanes, and at high-profile soccer video games.

However some of these hacks did not finish with the Silk Street’s demise. Crypto platforms proceed to be susceptible to criminals.

In October 2022, Binance, the world’s largest crypto alternate by buying and selling quantity, suffered a $570 million hack. The corporate stated a bug in a wise contract enabled hackers to use a cross-chain bridge, BSC Token Hub. In consequence, the hackers withdrew the platform’s native cryptocurrency, referred to as BNB tokens.

In March 2022, a distinct hacker discovered vulnerabilities within the decentralized finance platform Ronin Community and made off with greater than $600 million — the biggest hack up to now. The personal keys, which function passwords to guard cryptocurrency funds in wallets, have been compromised.

In line with a Chainalysis report, $1.9 billion price of cryptocurrency had been stolen in hacks of providers by means of July 2022, in contrast with just below $1.2 billion on the similar level in 2021. 

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