Bitcoin thief James Zhong sentenced to prison

A Georgia man who stole greater than 50,000 Bitcoin from the Silk Highway drug-trafficking website 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 inns, nightclubs and Lamborghinis, prosecutors mentioned. The worth of the Bitcoin seized is now about $1.56 billion. 

US District Decide Paul Gardephe cited the “extremely subtle nature of the crime” and Zhong’s lively concealment of the stolen Bitcoin for 9 years till brokers raided his home. Zhong confronted between 27 and 33 months in jail underneath advisory pointers, however Gardephe mentioned he was granting leniency due to the “actually distinctive circumstances” within the case. Nonetheless, the choose mentioned he additionally needed to discourage different criminals. 

“Whereas the sufferer on this case occurred to be a prison enterprise, the sufferer tomorrow could possibly be a reliable enterprise,” Gardephe mentioned. 

Prosecutors instructed the choose that Zhong ought to get jail as a result of he coated up his theft for almost a decade, transferring the Bitcoin by means of so-called mixers that make it more durable to hint transactions by jumbling tokens collectively. However additionally 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 Laptop

Zhong’s attorneys 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 have 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 attorneys mentioned in courtroom papers. “Having no buddies or household he may flip to, Jimmy discovered solace and friendship on this planet of his pc.”

In courtroom, Zhong expressed “disgrace and regret,” and instructed the choose, “I at all times knew what I did was flawed.” 

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 vital and price one thing.” 

Zhong mentioned that whereas some faculty buddies 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 attorneys argued that whereas he had no proper to the stolen Bitcoin, neither did Silk Highway. They mentioned {the marketplace} isn’t a sufferer “within the true sense of the phrase” underneath the regulation, noting that Silk Highway’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 extra Bitcoin and property. 

The heist started after Zhong had saved some Bitcoin on Silk Highway, the web black market. When he double-clicked the withdrawal button by mistake, he obtained 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 house in Gainesville, Georgia, together with $661,900 in money and gold and silver bars. Zhong saved the crypto on gadgets in a protected underneath floorboards and on a single-board pc stowed in a Cheetos popcorn tin in a closet. He later surrendered greater than 1,000 extra 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, based on 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 enchantment 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 house his Athens, Georgia, saying somebody had stolen a silver transient 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).