Darknet: Learn the crazy story of 50,000 bitcoins stolen from Silk Road in 2012

Ten years ago Silk Road was hacked. Using a loophole, a hacker stole over 50,000 bitcoins from a dark web black market believed to be eBay drugs. After a long investigation, this impressive cryptocurrency treasure has finally been found… at the bottom of a popcorn box.

The US Department of Justice reports that more than 50,676 bitcoins were seized in November 2021. At the time of this withdrawal, production was still worth more than $3 billion. At the end of last year, the price of bitcoin was still above the $60,000 threshold. A year later, the value of the seized bitcoins decreased by three. Currently, the price of the cryptocurrency queen is hovering around $20,000, which is far from the all-time high of last year.

Despite this, this is the second largest takeover of cryptocurrencies by US authorities. First, we find an operation against a couple created by Heather Morgan and her husband Ilya Lichtenstein in February last year. After a long investigation and several twists and turns, the police managed to recover 95,000 bitcoins. These currencies disappeared during the Bitfinex exchange platform hack in 2016.

See also: In the midst of an energy crisis, Europe says it is ready to ban bitcoin mining

Bitcoin stolen from Silk Road in 2012

As American Justice explains, the bitcoins seized last November were discovered during a search of James Zhong, a 32-year-old man living in the state of Georgia. The loot was stored on multiple devices. Law enforcement found the motherboard in an underfloor safe and in a popcorn box hidden in the closet. Police also found $600,000 in cash and precious metals in the safe.

Apparently, James Zhong got his hands on these bitcoins in 2012. The 22-year-old managed to get his hands on some of the cryptocurrencies belonging to Silk Road, the dark web’s most infamous black market. The marketplace allowed you to buy anything and everything with bitcoins, for example, weapons or drugs. The Silk Road closed in 2013 after the arrest of its founder, Ross Ulbricht. Two years later, he was convicted on seven counts and sentenced to life in prison.

In order to collect the cryptocurrencies belonging to Silk Road, James Zhong developed an ingenious scheme. The young man opened nine fake profiles on the platform. These accounts were funded with a few bitcoins. Each profile had between 200 and 2000 bitcoins.

“Mr. Zhong came up with a sophisticated plan to steal bitcoins from the infamous Silk Road Market. After he pulled off the heist, he tried to hide his loot with a series of complex transactions,” said Tyler Hatcher, the officer in charge of investigating the theft.

Subsequently, James Zhong took advantage of a security hole in the Silk Road. After making up to 140 transactions in a very short time, he convinced the marketplace’s withdrawal system to pay him 50,000 bitcoins to various digital wallets. To cover his tracks, he quickly transferred the stolen tokens to other addresses. The operation took no more than a few minutes.

Hacker’s mistakes

At the time of the theft, the price of bitcoin did not exceed $13. Thus, taking advantage of the growth of the crypto asset market, the thief has amassed a real fortune. To increase his holdings, Zhong also took advantage of the advent of Bitcoin Cash. During the blockchain split in 2017, a cybercriminal received 50,000 Bitcoin Cash. These tokens, automatically sent to BTC holders, were directly exchanged for traditional bitcoins, helping to inflate the status of the Silk Road hacker.

Having become rich, the young pirate invested in real estate. At the same time, he stood out for his ostentatious lifestyle. On social media, he regularly showed himself on luxury private yachts. However, he refrained from withdrawing most of his winnings so as not to attract the attention of financial authorities.

Despite the precautions taken by the hacker, the police managed to find traces of the stolen bitcoins by turning to the blockchain, according to a press release. Blockchain really keeps track of all transactions, which makes it easier for the authorities.

“For nearly a decade, the whereabouts of this huge missing piece of bitcoin has become a mystery worth more than $3.3 billion. Using state-of-the-art cryptocurrency tracking techniques and good old-fashioned police work, law enforcement located and recovered this impressive criminal treasure trove,” said Damian Williams, the prosecutor leading the case.

According to our Protos colleagues, the police basically apprehended the thief after a call made in 2019. That same year, James Zhong contacted the police to report a burglary at his home. He mentioned that many assets were stolen, including “a lot of Bitcoin.” This statement aroused interest among investigators, according to Protos, citing data provided by the Ministry of Justice.

The hacker also made the mistake of exchanging some of his stolen bitcoins through an exchange. This is how the police were able to link the identity of the thief to the cryptocurrencies that disappeared in 2012.

20 years in prison for hacking an eBay pharmacy

Arrested by police last year, James Zhong pleaded guilty to wire fraud at a recent hearing. He faces up to 20 years in prison. However, it is very likely that his lawyer will be able to spare him this maximum punishment.

Since his arrest, Zhong has indeed cooperated with the investigation. He also paid 860 additional bitcoins to the US government last March.

“Mr. Zhong returned almost all of the bitcoins he had acquired inappropriately. Ironically, given the rise in the value of bitcoins over the past decade, the value of the bitcoins he recovered exponentially exceeded the value of the bitcoins he stole,” says Michael Bahner, the pirate’s lawyer, demanding leniency from the courts.

According to his lawyer, the man who robbed the Silk Road is also tormented by remorse. The verdict will be delivered in February 2023.

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