- In 2019, Zhong called the police to inform them about stolen 150 BTC from his home , despite having mountains of incriminating evidence lying around in his home. Zhong revealed over the phone that he was an investor in Bitcoin, putting himself on the radar of investigators.
I’m having a panic attack,” Zhong told the dispatcher, according to a recording obtained by CNBC.
- 6 months after the incident, blockchain surveillance company Chainalysis was tracing the digital wallets containing the stolen Silk Road assets and saw the hacker make a tiny mistake when he transferred around $800 worth to a crypto exchange that followed established banking rules, including so-called know your customer processes, requiring real names and addresses of account holders.
- "The account was registered in Zhong’s name. The transaction took place in September 2019, six months after Zhong’s 911 call to the local police. That alone wasn’t enough to prove Zhong was the hacker. They had to be sure."
- Investigators devised a plan to approach Zhong using a ruse, telling him they were investigating the crime that he’d called about, the one in which a thief had stolen hundreds of thousands of dollars of his bitcoin, while in reality they were investigating Zhong for the Silk Road hack.
- "Playing on the ruse, the officers asked Zhong to open his laptop and explain how he came to have the bitcoin in the first place. Zhong sat on the couch next to the investigators and entered his password, asking them to turn away as he typed."
“He was navigating that keyboard like I’ve never seen someone navigate a keyboard. He didn’t have to use a mouse because he knew all the hotkeys,” said one of the investigators.
- When he opened the laptop, law enforcement could see his bitcoin wallet with ~1500 BTC, worth ~$60-70 million at the time. The evidence was enough to convince the investigators they were on the right track.
- The visit allowed the investigators to obtain a federal search warrant for Zhong’s home. The search happened on November 9, 2021.
- During the raid, an officer slid a device known as a “jiggler” into Zhong’s laptop, causing the cursor to continually move and giving law enforcement access to the password-protected contents of the computer.
- In an upstairs closet, they found a popcorn tin with a computer hidden inside that held millions of dollars worth of bitcoin.
Using sniffer dogs trained to detect electronics, investigators also found a safe buried in concrete under some basement floor tile. Court documents said the safe contained precious metals, stacks of cash and physical bitcoins minted in the early years of crypto. They also found a wallet with bitcoin from the original hack of Silk Road in 2012.
- "Investigators also discovered that as far back as 2009, the year bitcoin was invented, Zhong was among a small group of early coders who worked to develop and perfect the technology. He was a smaller contributor than some of the other OG players who have since become famous in the bitcoin community."
- James Zhong was charged by the US government last year for stealing more than 50,000 BTC from the online marketplace Silk Road in 2012. He was sentenced to 366 days in federal prison. Zhong, now 33 years old, began his sentence at the federal prison camp in Montgomery, Alabama, on July 14, 2023.
- "Zhong asked for no jail time because he was concerned about the fate of Chad, his 13-year-old dog. Zhong has had a difficult life. On the autism spectrum, he was severely bullied at school. And he found solace over the years in an online community where he could deploy his computing skills," noted CNBC.
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