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A Georgia man who stole greater than 50,000 Bitcoin from the Silk Street drug-trafficking web site earlier than his cache hit $3.35 billion in worth was ordered to serve a 12 months and a day in jail.
James Zhong, 32, was sentenced Friday in New York federal courtroom, the place he pleaded responsible to wire fraud final 12 months. On the time of the heist in 2012, the Bitcoin was price $620,000. When authorities seized gadgets holding the stolen Bitcoin in November 2021, its worth had exploded, making it the second-largest monetary seizure in US historical past.
Earlier than he was caught, Zhong spent $16 million of the proceeds on actual property investments, luxurious motels, nightclubs and Lamborghinis, prosecutors mentioned. The worth of the Bitcoin seized is now about $1.56 billion.
US District Choose Paul Gardephe cited the “extremely refined nature of the crime” and Zhong’s energetic concealment of the stolen Bitcoin for 9 years till brokers raided his home. Zhong confronted between 27 and 33 months in jail beneath advisory pointers, however Gardephe mentioned he was granting leniency due to the “really distinctive circumstances” within the case. Nonetheless, the choose mentioned he additionally wished to discourage different criminals.
“Whereas the sufferer on this case occurred to be a prison enterprise, the sufferer tomorrow may very well be a respectable enterprise,” Gardephe mentioned.
Prosecutors advised the choose that Zhong ought to get jail as a result of he coated up his theft for practically a decade, shifting the Bitcoin by way of so-called mixers that make it tougher to hint transactions by jumbling tokens collectively. However in addition they mentioned he ought to get lower than two years in jail, citing his youth, his autism and his assist in recovering the stolen crypto.
Solace in Pc
Zhong’s legal professionals requested the choose to spare him a jail time period, saying he got here from a dysfunctional household and acquired no love from his divorced dad and mom, who had been Chinese language immigrants. He was “severely bullied and victimized by his friends as a result of he was completely different — he was extraordinarily shy, chubby, and most importantly, suffered from undiagnosed autism spectrum dysfunction,” Zhong’s legal professionals mentioned in courtroom papers. “Having no associates or household he may flip to, Jimmy discovered solace and friendship on the earth of his pc.”
In courtroom, Zhong expressed “disgrace and regret,” and advised the choose, “I at all times knew what I did was unsuitable.”
He mentioned he hid his crimes as Bitcoin soared in worth.
“I feel I buried my head within the sand,” Zhong mentioned. “It made me really feel necessary and value one thing.”
Zhong mentioned that whereas some school associates have caught by him, the one who’s been most supportive is his canine Chad, who’s previous and sick.
Of their sentencing memo, Zhong’s legal professionals argued that whereas he had no proper to the stolen Bitcoin, neither did Silk Street. They mentioned {the marketplace} isn’t a sufferer “within the true sense of the phrase” beneath the regulation, noting that Silk Street’s imprisoned founder, Ross Ulbricht, contacted Zhong and requested him how he took the cryptocurrency. However he by no means requested for it again — and despatched extra.
After pleading responsible, Zhong agreed to forfeit $42.7 million in addition to further Bitcoin and property.
The heist started after Zhong had saved some Bitcoin on Silk Street, the web black market. When he double-clicked the withdrawal button by mistake, he bought again twice as a lot as he put in. Over a number of days, he deposited extra tokens and rapidly withdrew them, double-clicking every time. Exploiting that glitch led him to greater than 50,000 Bitcoin, every price about $12 on the time.
Federal brokers seized 50,491 Bitcoin from Zhong’s lakefront residence in Gainesville, Georgia, together with $661,900 in money and gold and silver bars. Zhong saved the crypto on gadgets in a protected beneath floorboards and on a single-board pc stowed in a Cheetos popcorn tin in a closet. He later surrendered greater than 1,000 further Bitcoin.
Zhong attended the College of Georgia from 2008 to 2014, incomes a bachelor’s diploma in pc science and mining Bitcoin. He additionally drank excessively and used cocaine, in response to a psychiatric examination report in his courtroom file.
He transformed some Bitcoin to $700,000 in money, so he would have a “case full of cash like within the motion pictures,” the report mentioned. “He hoped the visible attraction of the money would impress a feminine into having sexual relations with him,” the report mentioned. “He said his plan didn’t work.”
In 2019, Zhong reported a housebreaking at his residence his Athens, Georgia, saying somebody had stolen a silver temporary case with $400,000 in money.
The case is USA v. James Zhong, 22-cr-00606, US District Courtroom, Southern District of New York (Manhattan).
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