James Zhong, the Silk Road hacker, was sentenced to one year in prison for stealing Bitcoins. Now worth $3.4 billion.
James Zhong, the man who stored stolen Bitcoins in an underground safe, and a used Cheetos popcorn can, hidden in the bathroom cabinet under a pile of blankets, was sentenced to one year and one day in prison.
According to federal prosecutors, 32-year-old James Zhong stole more than 50,000 Bitcoins from Silk Road, a marketplace on the so-called “dark web” where users can buy anything.
Similarly, Silk Road founder Ross Ulbricht was sentenced in 2015 to life in prison without the possibility of parole, after being convicted of drug trafficking, money laundering, and computer hacking, among other charges.
James Zhong’s Story
Actually, James Zhong told people that he had been bullied growing up in Georgia. In fact, when he was a high school student, pranksters pulled down his pants while he was at a football game.
Indeed, Zhong was a pioneer of cryptocurrencies, and in 2009 he was mining hundreds of Bitcoins a day. However, when he was in college, he turned some of his digital wealth into $700,000 in cash. He wanted to have a “box full of money like in the movies.”
If anything, Zhong attended the University of Georgia from 2008 to 2014 and earned a bachelor’s degree in computer science and Bitcoin mining. He also drank excessively and used cocaine, according to a psychiatric examination report in his court file.
Now, in 2017, according to his attorney Michael Bachner, he went on a $16 million spending spree, much of it spent trying to win over friends. In addition, he gave away 258 Bitcoins, many of them on digital devices, each loaded with 50 Bitcoins. Also, he hosted friends on chartered planes and ships, at sporting events, and in luxurious hotels.
However, Zhong made his big mistake on December 16, 2020, according to court records and an analysis of his Bitcoin transactions by Elliptic. He combined crypto funds that the IRS had linked to the Silk Road robberies with legitimate funds that he kept on a cryptocurrency exchange.
The Silk Road Hoax
According to a statement from the Department of Justice, James Zhong was able to steal from the market by creating multiple accounts and tricking Silk Road into releasing the Bitcoin in their accounts.
Thus, a year later, federal officials closed Silk Road on criminal grounds and seized the computers containing its transaction records. The records did not reveal James Zhong’s mischief at first, as Zhong had moved the stolen Bitcoins from one account to another to cover his tracks. However, in November 2021, US authorities obtained a search warrant to check James Zhong’s home in Gainesville, Georgia.
According to the Department of Justice, investigators recovered more than 50,000 Bitcoins, divided between “a safe in the basement and a single-board computer that was submerged under the covers in a can of popcorn stored in the closet of the bathroom.” In addition, authorities also recovered more than $660,000 in cash, as well as silver and gold bullion.
After pleading guilty, Zhong agreed to forfeit $42.7 million, as well as Bitcoin and additional property. As a result, the Attorney for the Southern District of New York sentenced him to one year and one day in prison, on wire fraud charges.
By Audy Castaneda
