Darknet News

Silk Road Thief Sentenced to 1 Year, Gives Up $3.4 Billion in BTC

The US man who orchestrated a theft of more than 50,000 BTC from the original Silk Road escrow wallet in 2012 was sentenced to one year in prison yesterday, Apr. 14. James Zhong, of Georgia, managed to keep the source of his wealth a secret for nearly nine years before being identified as the thief by a Special Agent of the IRS. He was also ordered to forfeit slightly more than 51,680 BTC as part of the sentencing.

Zhong’s home was raided by federal agents in Nov. 2021, where they seized 50,491 BTC stored on hardware devices, physical coins, and seed phrases kept on paper. In the following months, Zhong transferred several hundred additional BTC to the control of the government. He had been living off proceeds from the sale of Bitcoin forks rather than the stolen BTC itself, slowly cashing it out in small increments to avoid garnering too much attention.

Zhong kept the origins of his wealth under wraps for nine years. Source: US Dept. of Justice

It was one particular slip-up that allowed Zhong to be identified by the IRS team investigating the whereabouts of the stolen Silk Road BTC, which he obtained by tricking the darknet market’s withdrawal system into releasing several thousand more BTC than he deposited, using a multitude of accounts. Blockchain analysis revealed that in Nov. 2021, Zhong moved some of the stolen BTC to an address he had previously used to receive change when sending coins to an exchange on which he was verified with his real name.

Between the years of 2013 and 2017, Zhong occasionally flexed his Bitcoin wealth online under the name loaded on the Bitcointalk forum and Reddit. According to his fictitious backstory, loaded accrued his massive Bitcoin stash through clever trades and managing the wealth of a non-existent client base. He occasionally signed messages in public from a well-stocked BTC address under his control as proof that he possessed the BTC, although was never truthful about its origins.

In March 2017, loaded challenged early Bitcoin adopter and Bitcoin Cash proponent Roger Ver to accept a 1:1 trade of his freshly-forked BCH (referred to as Bitcoin Unlimited before being named Bitcoin Cash) for Ver’s BTC. The deal never materialized as loaded went dark 10 days later, retiring his online moniker for good.

Zhong, who is 32 years old, previously pleaded guilty to one count of wire fraud. The conservative value of the BTC he is forfeiting is estimated to be approx. $3.4 billion.

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