Could this be the biggest cryptocurrency heist in history? It’s certainly one of the most interesting ones, considering just how little time the criminal will get – just one year in prison.
A report about how the authorities are catching criminals who use cryptocurrencies revealed the story of Mr. Zhong, who, as a 22-year-old University of Georgia, discovered a bug that allowed him to get insanely rich.
The short story? A decade ago, Zhong tried to buy cocaine on Silk Road, the famous online marketplace where shady transactions were made using crypto. When he double clicked the Withdraw button to get his bitcoin back, he noticed the transaction was doubled. Of course, greed is greed, and he withdrew so much bitcoin that, by 2021, he had $3.4 BILLION in his wallet.
Here’s a great sum-up from WSJ, which published a fantastic report about just how anonymous cryptocurrencies are::
“James Zhong appeared to have pulled off the perfect crime. In December 2012, he stumbled upon a software bug while withdrawing money from his account on Silk Road, an online marketplace used to hide criminal dealings behind the seemingly bulletproof anonymity of blockchain transactions and the dark web. Mr. Zhong, a 22-year-old University of Georgia computer-science student at the time, used the site to buy cocaine.
“I accidentally double-clicked the withdraw button and was shocked to discover that it resulted in allowing me to withdraw double the amount of bitcoin I had deposited,” he later said in federal court. After the first fraudulent withdrawal, Mr. Zhong created new accounts and with a few hours of work stole 50,000 bitcoins worth around $600,000, court papers from federal prosecutors show.
Federal officials closed Silk Road a year later on criminal grounds and seized computers that held its transaction records.
The records didn’t reveal Mr. Zhong’s caper at first. Authorities hadn’t yet mastered how to track people and groups hidden behind blockchain wallet addresses, the series of letters and numbers used to anonymously send and receive cryptocurrency. One elemental feature of the system was the privacy it gave users.
Mr. Zhong moved the stolen bitcoins from one account to another for eight years to cover his tracks. By late 2021, the red-hot crypto market had raised the value of his trove to $3.4 billion. In November 2021, federal agents surprised Mr. Zhong with a search warrant and found the digital keys to his crypto fortune hidden in a basement floor safe and a popcorn tin in the bathroom.
Mr. Zhong, who pleaded guilty to wire fraud, is scheduled to be sentenced Friday in New York federal court, where prosecutors are seeking a prison sentence of less than two years.”
According to Fortune.com, US District Judge Paul Gardephe cited the “highly sophisticated nature of the crime” and Zhong’s active concealment of the stolen Bitcoin for nine years until agents raided his house. As the defendant expressed shame and remorse, Gardephe said he was granting leniency because of the “truly unique circumstances” in the case.