A former Silk Road user has been sentenced to one year and one day in prison after being found guilty of stealing over 50,000 Bitcoin.
He stole the Bitcoin from the infamous darknet marketplace. James Zhong, 32, from Gainesville, Georgia, pleaded guilty to one count of wire fraud. He exploited a flaw in Silk Road’s payment system that allowed him to use nine accounts to create rapid transactions, tricking the withdrawal processing system.
The incidents took place between 2011 and 2013, when Bitcoin was worth far less than its current market price. At the time of the theft, Bitcoin ended 2013 at less than $800 per coin, compared to its current market price of approximately $30,000.
Authorities raided Zhong’s home in November 2021, when Bitcoin reached its highest-ever value of nearly $69,000, and confiscated the stolen cryptocurrency, which was worth over $1.57 billion at the time of his sentencing.
In one instance, Zhong deposited 500 Bitcoin into a wallet and within five seconds executed five withdrawals, exploiting a flaw in Silk Road’s payment system that turned his initial deposit into 2,500 Bitcoin.
According to the US Justice Department, he also received over 50,000 in Bitcoin Cash following the 2017 hard fork split between Bitcoin and Bitcoin Cash’s blockchains.
Federal law enforcement recovered the nearly 50,500 Bitcoin from a single-board computer hidden under blankets in a Cheetos popcorn tin stored in a bathroom closet, according to a Justice Department release announcing Zhong’s sentencing.
They also seized nearly $662,000 in cash and 25 Casascius coins, physical metal coins created to represent Bitcoin that also contained private keys to control actual Bitcoin. Those physical representations held value totaling approximately 174 Bitcoin.
All of Zhong’s assets, including over 50,000 Bitcoin, 25 Casascius coins, several physical metal bars, cash, and an investment in a real estate holding company, are now property of the United States.
This case highlights the importance of cybersecurity and the dangers of exploiting weaknesses in online payment systems.
The theft of such a large amount of cryptocurrency is a reminder that the risks associated with digital currencies are not limited to market fluctuations but also include theft and fraud.
It also emphasizes the US government’s continued efforts to combat illegal activity on the dark web and hold perpetrators accountable for their actions.
Silk road Bitcoin Hacker
In conclusion, James Zhong’s sentencing for stealing over 50,000 Bitcoin from Silk Road highlights the importance of cybersecurity and the dangers of exploiting weaknesses in online payment systems.
The case serves as a reminder that digital currencies are not immune to theft and fraud, and the US government is committed to combatting illegal activity on the dark web and holding perpetrators accountable for their actions.