Silk Road hacker pleads guilty, faces up to 20 years in prison, 50,000 bitcoins may be auctioned off

The U.S. Department of Justice announced that law enforcement authorities seized 50,676 bitcoins from defendant James Zhong on November 9th of last year. These bitcoins were stolen by James Zhong in September 2012 through a vulnerability in transactions on the Silk Road website. Zhong has now pleaded guilty and faces a maximum sentence of 20 years in prison.

Ten years ago, when the bitcoins were worth around $10 each, the total value at the time of seizure last year was approximately $3.36 billion, now around $1 billion.

New York Southern District Attorney Damian Williams stated:

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Over the past decade, this large sum of lost bitcoins has grown into a mystery of once exceeding $3.3 billion, and law enforcement authorities tracked down this fund through blockchain tracing techniques and traditional, classic police work.

James Zhong's Theft Method

The Silk Road was a dark web site where, in September 2012, James Zhong stole Bitcoin using the following methods:

• Registered 9 Silk Road accounts anonymously
• Rapidly executed over 140 transactions to deceive the withdrawal system
• Transferred Bitcoin to multiple addresses

He registered accounts with minimal information, provided each account with funds ranging from 200 to 2,000, and quickly executed a series of withdrawal operations, with the amounts far exceeding the funds he provided for the accounts. For example:

On September 19, 2012, he deposited 500 BTC into the account, and within 5 seconds of depositing, rapidly executed 5 withdrawals of 500 BTC each, resulting in a net profit of 2,000 Bitcoin.

In 2017, the fifty thousand Bitcoins he held also received an equal amount of BCH fork coins, which equates to approximately 53,500 Bitcoins.

Returning Remaining Bitcoins This March

In addition to the approximately fifty thousand Bitcoins seized last year, James Zhong has agreed to gradually return the remaining Bitcoins this March:

• November 9, 2021: Seized 50,491.06251844 Bitcoin
• March 25, 2022: Returned 825.38833159 Bitcoin
• May 25, 2022: Returned 35.4470080 Bitcoin