James Zhong surprisingly possessed more than 50,000 Bitcoin and you would not believe how he got them all. By stealing the Bitcoin with Silk Road website, which was involved in criminal transactions.
There was a catch on the website. Zhong used to buy cocaine from the Dark Web, and when he accidentally clicked withdraw button twice on one of the sites, he received double the amount of bitcoin that he deposited with them. This was shocking for him.
He became $600,000 worth rich in just a few hours after working out some strategy behind it and stole 50K bitcoins in no time.
By 2021, his Bitcoin became worth $3.4 billion and he was a billionaire of the time. He lived a lavish life, with beach homes, Ferrari at the door, a $150,000 Tesla, and partying all the time.
Zhong was arrested after Warrant was issued by FED. They seized his computers and keys and also traced down the world of criminals with that information. His transactions linked back to every crime that he might have done or someone who was a criminal as well.
After the USA seized many transactions like that (~ $10 billion in the past two years), many investors believe blockchain is fun and serious stuff at the same time.
“If there’s one thing the blockchain does really well, it preserves evidence perfectly,” said Jonathan Levin, a pioneer cryptocurrency sleuth and one of the founders of Chainalysis.
I would recommend reading the whole story in the article linked. IT walks you through Zhong's life and how he committed this crime from the young age of 21 years old!
James Zhong appeared to have pulled off the perfect crime.
In December 2012, he stumbled upon a software bug while withdrawing money from his account on Silk Road, an online marketplace used to hide criminal dealings behind the seemingly bulletproof anonymity of blockchain transactions and the dark web. Mr. Zhong, a 22-year-old University of Georgia computer-science student at the time, used the site to buy cocaine.
“I accidentally double-clicked the withdraw button and was shocked to discover that it resulted in allowing me to withdraw double the amount of bitcoin I had deposited,” he later said in federal court. After the first fraudulent withdrawal, Mr. Zhong created new accounts and with a few hours of work stole 50,000 bitcoins worth around $600,000, court papers from federal prosecutors show.
Federal officials closed Silk Road a year later on criminal grounds and seized computers that held its transaction records. The records didn’t reveal Mr. Zhong’s caper at first. Authorities hadn’t yet mastered how to track people and groups hidden behind blockchain wallet addresses, the series of letters and numbers used to anonymously send and receive cryptocurrency. One elemental feature of the system was the privacy it gave users.
Mr. Zhong moved the stolen bitcoins from one account to another for eight years to cover his tracks. By late 2021, the red-hot crypto market had raised the value of his trove to $3.4 billion. He still lived in a modest house in Athens, Ga., and dressed in shorts and T-shirts. He also had a lake-house getaway in Gainesville, Ga., a Lamborghini sports car and a $150,000 Tesla.
In November 2021, federal agents surprised Mr. Zhong with a search warrant and found the digital keys to his crypto fortune hidden in a basement floor safe and a popcorn tin in the bathroom. Mr. Zhong, who pleaded guilty to wire fraud, is scheduled to be sentenced Friday in New York federal court, where prosecutors are seeking a prison sentence of less than two years.
Mr. Zhong’s case is one of the highest-profile examples of how federal authorities have pierced the veil of blockchain transactions. Private and government investigators can now identify wallet addresses associated with terrorists, drug traffickers, money launderers and cybercriminals, all of which were supposed to be anonymous.
Law-enforcement agencies, working with cryptocurrency exchanges and blockchain-analytics companies, have compiled data gleaned from earlier investigations, including the Silk Road case, to map the flow of cryptocurrency transactions across criminal networks worldwide. In the past two years, the U.S. has seized more than $10 billion worth of digital currency through successful prosecutions, according to the Internal Revenue Service—in essence, by following the money. Instead of subpoenas to banks or other financial institutions, investigators can look to the blockchain for an instant snapshot of the money trail.
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The U.S. Cracked a $3.4 Billion Crypto Heist—and Bitcoin’s Anonymity
