$3 billion Bitcoin whale hacked, US authorities: Accidentally discovered he was a dark web thief

The U.S. authorities have cracked a long-standing theft case on the dark web: In 2012, fifty thousand bitcoins were stolen from the dark web, and the value of these stolen bitcoins eventually exceeded $3 billion, becoming one of the biggest mysteries in the world of cryptocurrency. Ten years later, the hacker from that year was unexpectedly found in a theft case report.

The Stolen and Lost $3 Billion: Jimmy Zhong's Secret Life

On March 13, 2019, 28-year-old Jimmy Zhong, a University of Georgia alumnus and local party-goer, reported a large amount of cryptocurrency stolen from his home. Jimmy Zhong, also a computer expert, had an unusually powerful digital surveillance system at home. The system also captured photos of the thief:

Jimmy Zhong was known for his luxurious lifestyle, which included hosting parties, staying in luxury hotels, and shopping for luxury goods. He claimed to be an early participant in Bitcoin in 2009.

Nearly a decade after the 2012 "Dark Web Silk Road" hacking incident, this theft case allowed the U.S. Internal Revenue Service Criminal Investigation Division (IRS-CI) to crack the case. Blockchain analysis company Chainalysis noticed a mistake made by the hackers. The dark web hackers transferred a small amount of cryptocurrency to an exchange that required the account holder to provide a real name and address, and the account was registered in Jimmy Zhong's name.

The IRS collaborated with local authorities to further investigate Jimmy Zhong, reaching out to him under the guise of assisting with his home theft case, but in reality, investigating his potential involvement in the Silk Road theft case.

Police asked Jimmy Zhong to open his laptop and explain his Bitcoin holdings. Upon opening the laptop, they saw that his Bitcoin wallet contained between $60-70 million worth of Bitcoin.

Evidence collected during this visit led investigators to obtain a search warrant for Jimmy Zhong. They returned on November 9, 2021, with a large team of police officers for a thorough search.

During the search, they found a computer hidden in a popcorn tin containing millions of dollars worth of Bitcoin. They also discovered a safe buried under the basement floor containing precious metals, cash, and physical Bitcoin wallets, including some from the 2012 Silk Road hacker incident.

Investigators discovered that Jimmy Zhong was an OG in the crypto world. Since the inception of Bitcoin in 2009, he had been involved, contributed to the original Bitcoin code, and provided ideas to early developers.

Jimmy Zhong was charged with telecommunications fraud and sentenced to one year and one day in federal prison after pleading guilty. He began his sentence on July 14, 2023.

U.S. Government Seizes Dark Web Bitcoin

The U.S. government seized the stolen Bitcoin. Although victims were given the opportunity to reclaim the Bitcoin, no one came forward. The government sold the stolen Bitcoin and retained the proceeds. Some of the proceeds may be shared with local law enforcement as a token of appreciation for their assistance in the case.

The U.S. government is a holder of 200,000 bitcoins, with "value" not being the primary focus

During sentencing, Jimmy Zhong claimed that owning billions of dollars of stolen Bitcoin made him feel important. His lawyer argued that this theft did not harm the U.S. government but rather benefited the government.

For more details on the case, please see the CNBC report