A Georgia man who stole more than 50,000 bitcoins from a Silk Road drug site before his stash was worth $3.35 billion has been ordered to serve a year and a day in jail.
James Zhong, 32, was to rule Friday in federal court in New York, where he pleaded guilty to wire fraud last year. At the time of the theft in 2012, the bitcoin was worth $620,000. When authorities seized devices holding stolen bitcoin in November 2021, their value exploded, making it the second largest financial seizure in US history.
Prosecutors said that prior to his arrest, Chung spent $16 million of the proceeds on real estate investments, luxury hotels, nightclubs and Lamborghini. The seized Bitcoin is now worth around $1.56 billion.
US District Judge Paul Gardevi cited the “extremely complex nature of the crime” and Zhong’s active concealment of stolen bitcoin for nine years until agents raided his home. Zhong faced between 27 and 33 months in prison under advisory guidelines, but Gardephe said he was granted leniency because of the “really unique circumstances” in the case. However, the judge said he also wanted to deter other criminals.
“While in this case the victim was a criminal enterprise, tomorrow the victim could be a legitimate business,” Gardevi said.
spp Tell The judge says Zhong should go to jail because he covered up his theft for nearly a decade, moving Bitcoin through so-called mixers that make transactions difficult to trace by shuffling tokens together. But they also said he should be sentenced to less than two years in prison, citing his youth, his autism, and his help in recovering stolen cryptocurrency.
Solace in the computer
Chung’s lawyers asked the judge to spare him a prison sentence, saying he came from a dysfunctional family and receives no love from his divorced parents, who were Chinese immigrants. Chung’s lawyers said in court papers that he was “extremely bullied and victimized by his peers because he was different — he was extremely shy, overweight, and most importantly, he had an undiagnosed autism spectrum disorder.” “Having no friends or family to turn to, Jimmy found solace and friendship in his computer world.”
In court, Zhong expressed “shame and remorse”, telling the judge, “I always knew what I did was wrong.”
He said he hid his crimes as the value of bitcoin soared.
“I think I buried my head in the sand,” Chung said. “It made me feel important and worth something.”
Chung said that while some of his college friends have stuck with him, the person who is most supportive is his dog Chad, who is old and sick.
in their Judgment noteZhong’s lawyers argued that while he had no right to the stolen Bitcoin, neither did Silk Road. The market is not a victim in the “literal sense of the word” under the law, they said, pointing out that the imprisoned Silk Road founder, Ross Ulbricht, called Zhong and asked him how he took the cryptocurrency. But he never asked for it – and sent more.
After pleading guilty, Zhong agreed to forfeit $42.7 million plus additional bitcoins and property.
The theft began after Zhong stashed some bitcoins on Silk Road, the online black market. When he accidentally double-clicked the withdraw button, he got back double what he entered. Over the course of several days, he quickly deposited and withdrew more symbols, double-clicking each time. Exploiting this flaw netted him more than 50,000 bitcoins, each worth about $12 at the time.
Federal agents seized 50,491 bitcoins from Zhong’s lakefront home in Gainesville, Georgia, along with $661,900 in cash and gold and silver bars. Zhong stored the cryptocurrency on hardware in a safe under the floorboards and on a single-board computer stored in a Cheetos popcorn box in a closet. He later hands over an additional 1,000 Bitcoin.
Zhong attended the University of Georgia from 2008 to 2014, earning a bachelor’s degree in computer science and bitcoin mining. He also drank excessively and used cocaine, according to a psychiatric examination report in the court filing.
He converted some bitcoin into $700,000 in cash, the report said, so he would have “a case full of money like in the movies.” “He hoped that the visual appeal of the money would impress the woman into having sexual relations with him,” the report said. He stated that his plan did not work.
In 2019, Zhong reported a burglary at his home in Athens, Georgia, saying someone stole a brief silver bag worth $400,000 in cash.
The case is USA v. James Zhong, 22-cr-00606, US District Court, Southern District of New York (Manhattan).