The US Attorney’s Office for the Southern District of New York has announced the sentencing of James Zhong, a man who pleaded guilty to wire fraud charges in 2012 in connection with illegally acquired Bitcoin from the Silk Road. Zhong has been sentenced to one year and one day in prison for his crimes.
In December 2012, while withdrawing money from Silk Road, a prominent drug-trafficking website in the underground, Zhong discovered a software fault. He observed that the web enables users to withdraw double the number of Bitcoins that they have put in after unintentionally double pressing the withdraw button. Zhong then stole 50,000 Bitcoins worth around $600,000 at that time within hours, according to court papers presented by federal prosecutors.
Zhong hid his wrongdoing for around ten years before facing prosecution, using a decentralized Bitcoin mixer, an overseas cryptocurrency exchange, and an array of technological tools to frustrate tracing efforts. However, US law enforcement managed to uncover Zhong’s scheme and obtained final orders of forfeiture for over 51,680 Bitcoin.
U.S. Attorney Damian Williams stated that cyber-criminals should heed this message: “we will follow the money and hold you accountable, no matter how sophisticated your scheme and no matter how long it takes.”
This sentencing is another example of the increasing efforts of law enforcement agencies in tracing cryptocurrency transactions. According to the Internal Revenue Service (IRS), the United States has confiscated more than $10 billion in cryptocurrencies in the last two years alone via successful prosecutions based on tracing currency transactions. Instead of serving subpoenas on banks or financial organizations, investigators can now examine the blockchain and trace the journey of Bitcoin.
Overall, the message from the US Justice Department and the IRS is clear for those who engage in illegal activities involving cryptocurrency will be held accountable, and law enforcement will continue to use all available tools to trace their transactions and seize their assets.
