IRS Seizes Billions in Bitcoin From Hacker
(ConservativeSense.com) – Cryptocurrency is still somewhat mysterious for most people. Only about 16% of US adults say they have personally traded, invested in, or used Bitcoin, Ether, or other cryptocurrencies, according to Pew Research. Even more enigmatic, the dark web isn’t someplace most Americans frequent. Yet, a dark-web hacker pleaded guilty on Friday, November 4, to wire fraud. As part of the case, the IRS seized billions of dollars in cryptocurrency and other assets from him last year in a joint operation with the DOJ, the FBI, and a blockchain analysis firm called Chainalysis.
In 2012, James Zhong stumbled on a software glitch in the Silk Road, a dark-web marketplace developed by the now-notorious Ross Ulbricht. It caters to those buying and selling illicit goods using cryptocurrency, allowing buyers to remain untraceable and outside the bounds of law enforcement. At least, that was the theory. As of 2015, the FBI dismantled the Silk Road, and Ulbricht is serving two life sentences in federal custody. But that was after Zhong found he could exploit a bug in the platform’s payment system allowing him to withdraw more Bitcoin than he deposited — much more.
— The Hacker News (@TheHackersNews) November 8, 2022
Using an initial investment of as little as 200 and as much as 2000 bitcoin (about $2,000 to $20,000 in 2012 currency,) the hacker stole more than 50,000 bitcoin, valued at approximately $506,760 in 2012. At the time of his November 2021 arrest, the cryptocurrency carried a value of almost $3.36 billion — it was worth nearly $1 trillion when he made his guilty plea on Friday.
Since stealing the assets, Zhong spent almost none of it. Instead, it remained hidden on an old-style computer board stashed inside a popcorn tin along with over $600,000 in cash and rare metals in a floor safe in a basement bathroom in his Georgia home.
In addition to forfeiting the Bitcoin assets, cash, and rare metals found in the floor safe, Zhong agreed to forfeit his 80% interest in his Memphis-based investment company and the physical bitcoins in his possession. Zhong, 32, faces a possible maximum sentence of 20 years for the count of wire fraud. Judge Paul G. Gardephe will pass the sentence on February 22, 2023.
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