A fraudster arrested by US authorities with a billion dollars stash of bitcoin hidden around his luxury home, may have squirrelled away millions more.
Last week James Zhong pleaded guilty to wire fraud, with Internal Revenue Service (IRS) triumphantly announcing it had recovered more than $1.1 billion US dollars in bitcoin, plus he had agreed to forfeit an 80 per cent stake in a real estate company, and $691,000 US dollars, physical coins, along with bars of gold and silver. The bitcoin had at one staged been valued at $3.3 billion dollars but the collapse of crypto currency worldwide in the last 12 months resulted in the haul losing two-thirds of its value.
The source of Zhong’s stolen bitcoins was Silk Road, an online black market where users buy and sell illicit goods anonymously, using cryptocurrency as payment to enable anonymous transactions.
In 2012, in the early days of bitcoin, Zhong set up several accounts to trick the Silk Road’s withdrawal system into releasing 50,000 bitcoin into his fraudulent accounts, under usernames such as “thetormentor,” “suxor,” “dubba,” “gribs,” “s1lky,” and “imsh.” Zhong then covered his tracks by transferring the illicit proceeds into a string of accounts set up in a manner to conceal his ownership and identity and stay under the radar.
Following his hack, he registered on Bitcoin forum site bitcointalk.org under the name “Loaded,” where he described himself as “Bitcoin multimillionaire, broker, and asset manager.” He boasted in public message boards about his state-of-the-art computer setup, which ultimately allowed him to conduct his fraudulent activity.
According to public records, Zhong was President and CEO of JZ Capital, a company registered to his home address from 2014. His now deleted LinkedIn profile shows that his work there focused on “investments and venture capital,” and also boasted that he is a “large early bitcoin investor with extensive knowledge of its inner workings.”
In March 2019, he unwittingly tipped off the authorities to his large stash of Bitcoin, after he reported a burglary at his Ruth Street home in Athens, Georgia. Zhong told local police that a briefcase containing $400,000 and a USB thumb drive containing personal information had been stolen, which raised red flags and triggered an investigation by the IRS.
Ultimately, Zhong’s home was raided which found the crypto assets hidden in floor safes and submerged under blankets in a popcorn tin.
Despite Zhong’s sophisticated scheme, authorities were able to follow the money linking him to the fraudulent transactions before arresting him in November 2021 on charges of wire fraud.
US Attorney Damian Williams said in a statement “Thanks to state-of-the art cryptocurrency tracing and good old-fashioned police work, law enforcement located and recovered this impressive cache of crime proceeds.”
The computer science graduate now faces a potential maximum sentence of 20 years in prison.
Crypto platforms continue to be vulnerable to criminals, as other crypto exchange hacks have been identified since, including a $4bn Bitfinex hack in 2016, which was seized earlier this year.