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- Zhong successfully manipulated the DNM’s withdrawal system to transfer 50,000 BTC.
- Zhong created fraudulent accounts specifically to execute the hack.
As reported by the New York Department of Justice, U.S. District Judge Paul G. Gardephe sentenced James Zhong to one year in prison after being informed of the government’s intention to auction 41,000 seized bitcoin (BTC) this year and the sale of 9,861.1707894 BTC on March 14, 2023.
By creating nine distinct Silk Road accounts and conducting 140 separate transactions, Zhong managed to trick the DNM’s withdrawal mechanism into transferring 50,000 BTC to wallets he controlled.
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No Legitimate Purchases on Silk Road
Zhong set up fake accounts solely for the purpose of executing the hack; he did not make any legitimate purchases on Silk Road. Analysts have estimated that he acquired a net total of over 50,000 BTC at an expense ranging from 200 to 2000 BTC.
Previously, in August 2017, during the Bitcoin split, Zhong received 50,000 Bitcoin cash (BCH), which he quickly exchanged on an international cryptocurrency exchange for 3,500 BTC. A hidden safe in the basement of his home in Gainesville, Georgia was discovered after blankets and a Cheetos popcorn container were moved.
On three separate occasions, federal authorities seized 51,351.89785803 bitcoin, along with a collection of precious metals and $661,900 in cash. Authorities also acquired an 80% stake in RE&D Investments, a Memphis firm with significant real estate holdings, from Zhong.
The case involving 32-year-old Zhong, who pleaded guilty to wire fraud, involved the New York Department of Justice, the Internal Revenue Service (IRS), the Los Angeles Field Office of the IRS Criminal Investigation Division’s Western Cyber Crimes Unit, and the Athens-Clarke County Police Department.
