Bitcoin thief James Zhong sentenced to prison

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 yr and a day in jail. 

James Zhong, 32, was sentenced Friday in New York federal court docket, the place he pleaded responsible to wire fraud final yr. 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 resorts, nightclubs and Lamborghinis, prosecutors stated. The worth of the Bitcoin seized is now about $1.56 billion. 

US District Choose 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 stated he was granting leniency due to the “actually distinctive circumstances” within the case. Nonetheless, the choose stated he additionally needed to discourage different criminals. 

“Whereas the sufferer on this case occurred to be a legal enterprise, the sufferer tomorrow might be a authentic enterprise,” Gardephe stated. 

Prosecutors instructed the choose that Zhong ought to get jail as a result of he lined up his theft for almost a decade, transferring the Bitcoin by so-called mixers that make it tougher to hint transactions by jumbling tokens collectively. However in addition they stated 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 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 stated in court docket papers. “Having no associates or household he might flip to, Jimmy discovered solace and friendship on the earth of his pc.”

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

He stated he hid his crimes as Bitcoin soared in worth. 

“I believe I buried my head within the sand,” Zhong stated. “It made me really feel vital and value one thing.” 

Zhong stated 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 attorneys argued that whereas he had no proper to the stolen Bitcoin, neither did Silk Street. They stated {the marketplace} isn’t a sufferer “within the true sense of the phrase” underneath the legislation, 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 received again twice as a lot as he put in. Over a number of days, he deposited extra tokens and shortly 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 secure underneath 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 line with a psychiatric examination report in his court docket file. 

He transformed some Bitcoin to $700,000 in money, so he would have a “case full of cash like within the films,” the report stated. “He hoped the visible attraction of the money would impress a feminine into having sexual relations with him,” the report stated. “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 temporary case with $400,000 in money. 

The case is USA v. James Zhong, 22-cr-00606, US District Court docket, Southern District of New York (Manhattan). 

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