U.S. Unmasks Hacker Who Stole 50,000 Bitcoins From Silk Road
Arthur T Knackerbracket has processed the following story:
The U.S. Department of Justice has announced today the conviction of James Zhong, a mysterious hacker who stole 50,000 bitcoins from the 'Silk Road' dark net marketplace.
Zhong pled guilty to money laundering crimes on Friday, November 4, for exploiting a "withdrawal processing flaw" that allowed him to withdraw many times more Bitcoin than he deposited on the dark web marketplace.
The DoJ announcement also provides more details about the seizure of 51,351.9 Bitcoin, valued at over $3.3 billion at the time of the action, that occurred in November 2021.
James Zhong used to be a member of the notorious dark net marketplace 'Silk Road,' a now-defunct illicit goods market that operated between 2011 and 2013, having over 100,000 members.
As the defendant confessed, in September 2012, he stole 50,000 bitcoin from Silk Road by exploiting a flaw in the market's transaction system. Zhong funded nine different accounts with an initial deposit of 200 to 2,000 bitcoin and then triggered 140 withdrawal transactions in rapid succession. The hacker exploited a lag in the market's transaction system allowing someone to withdraw their own escrow multiple times. This way, Zhong tricked the system into releasing 50,000 bitcoin, which he then moved to various wallets to obscure the money trace.
[...] Today's Department of Justice announcement explains that the seizure occurred on November 9, 2021, when law enforcement authorities holding a search warrant located the following on Zhong's residence:
- 50,491 Bitcoin hidden in an underground floor safe and on a single-board computer submerged under blankets in a popcorn tin inside a bathroom closet.
- 11.12 Bitcoin
- $661,900 in cash
- 25 Casascius coins (physical Bitcoin) valued at 174 Bitcoin
- Four 1-ounce silver bars
- Four 10-ounce silver bars
- Three 1-ounce gold bars
- One gold coin
Zhong is scheduled to hear his sentence on February 22, 2023, with the maximum potential penalty for wire fraud being 20 years in prison.
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