The US Department of Justice said on Monday it seized about $3.36 billion in stolen bitcoin during a previously unreported campaign in 2021 on the residence of a wanted man known as James Chong.
Chung on Friday pleaded guilty to a charge of telephone fraud that carries a maximum sentence of 20 years in prison.
The Department of Justice said that US authorities seized about 50,676 Bitcoin units, worth more than $3.36 billion, from Chung during a search of his home in Gainesville, Georgia, on November 9, 2021. This is the Department of Justice’s second largest financial seizure to date, after seizing 3.6 billion Dollars of stolen cryptocurrency linked to the Bitfinex hack, which was announced by the Department of Justice in February.
According to the authorities, Zhong stole bitcoin from an illegal market called the Silk Road, a dark web forum where drugs and other illegal cryptocurrency products are bought and sold. The Silk Road Forum was launched in 2011, but was shut down by the FBI in 2013. Its founder, Ross William Ulbricht, is serving a life sentence, according to CNBC.
According to the Southern District of New York, Chung took advantage of market weaknesses to implement the hack.
Special Agent in Charge Tyler Hatcher, of the Internal Revenue Service – Criminal Investigations, said Chung used a “sophisticated scheme” to steal bitcoin from the Silk Road.
According to the press release, Zhong created 9 fraudulent accounts on Silk Road in September 2012, each funding between 200 and 2,000 Bitcoin. He then launched more than 140 transactions in quick succession, tricking the market’s withdrawal processing system into issuing nearly 50,000 bitcoins in his accounts. Chung then transferred his bitcoin to a variety of wallet addresses, all under his control.
Through blockchain analysis and policing, law enforcement experts and blockchain network analysis have been able to retrieve more than 50,000 bitcoins from Zhong. They even discovered cryptocurrency stored on a computer covered in blankets and hidden in a bathroom cabinet, according to the press release.
Public records show that Chung was president and CEO of a company he set up himself called JZ Capital LLC, which he registered in Georgia in 2014. According to his LinkedIn profile, his work there focused on “investments and venture capital.”
His profile also states that he was a “large investor in early Bitcoin with extensive knowledge of its inner workings” and had experience developing software in computer programming languages.