The US is seeking the forfeiture of more than $1 billion in bitcoin stolen from the Silk Road online marketplace, federal prosecutors in Manhattan said on Monday.
In the second largest seizure in Department of Justice history, Internal Revenue Service agents obtained the 50,000 bitcoin during a November 2021 search of the defendant James Zhong’s home in Gainesville, Georgia.
Zhong, 32, on Friday pleaded guilty to wire fraud for tricking Silk Road’s processing system into releasing the funds to his accounts in 2012.
By the time it was seized, the bitcoin was worth more than $3 billion. It has since lost about two-thirds of its value.
Some of the stolen bitcoin was found on a computer in a popcorn tin stored in a bathroom closet, IRS special agent Trevor McAleenan said in an affidavit.
“For almost 10 years, the whereabouts of this massive chunk of missing bitcoin had ballooned into an over $3.3 billion mystery,” US Attorney Damian Williams in Manhattan said in a statement. “We won’t stop following the money … even to a circuit board in the bottom of a popcorn tin.”
The US government seized Silk Road in 2013, describing the underground website as a massive illegal drug and money-laundering marketplace.
Silk Road creator Ross Ulbricht was convicted in 2015 of seven counts of enabling illegal drug sales via bitcoin. He was sentenced to life in prison, and lost an appeal in 2017.
Zhong could face 27 to 33 months in prison under recommended federal guidelines at his Feb. 22, 2023 sentencing before US District Judge Paul Gardephe, though prosecutors can seek a longer sentence.
The defendant also agreed to forfeit his stake in a real estate company, plus $661,900 and other items.
His lawyer Michael Bachner said Zhong has returned “virtually” all of the bitcoin.
“Mr. Zhong is extremely remorseful for his conduct that occurred over 10 years ago when he was just 22,” Bachner said in a statement.