US resident pleads guilty to Silk Road fraud involving 50,000 BTC

Georgia man pleads guilty to Silk Road fraud involving 50,000 BTC.

A 32-year-old Georgia resident, James Zhong, pleaded guilty to illegally obtaining 50,000 BTC on the dark-net marketplace Silk Road. The U.S. Department of Justice said.

In September 2012, Zhong engaged in a fraudulent scheme using fake accounts, neither listing nor purchasing any goods or services on the platform. According to authorities, he deposited between 200 and 2,000 BTC, after which he made rapid withdrawals.

“For example, on September 19, 2012, Zhong transferred 500 BTC to a Silk Road wallet. Less than five seconds after making the deposit, he made five withdrawals of 500 BTC each […], resulting in a net profit of 2,000 BTC,” the statement said.

According to the DOJ, Zhong initiated more than 140 such transactions in total. The scheme netted him 50,000 BTC. After the Bitcoin Cash hard fork, an equivalent amount was credited to his address, which he exchanged for Bitcoin.

“In total by the last quarter of 2017, Zhong held about 53,500 BTC,” the department said.

On November 9, 2021, law enforcement officials conducted searches at the man’s residence. They seized approximately 50,676 BTC ($3.36 billion at the time), $661,900 in cash, and bars of precious metals. In March 2022, Zhong voluntarily handed over more than 1,004 BTC to authorities, to which he had access.

The Georgia resident pleaded guilty to fraud through electronic means. The maximum penalty for this offence is 20 years in prison.

The court issued a preliminary order approving the seizure of Zhong’s assets. A final sentence will be announced on February 22, 2023.

In November 2020, the U.S. Department of Justice confiscated Silk Road-related 69,370 BTC. According to court documents, the owner of the address under the alias Invididual X hacked the marketplace and stole the funds.

Earlier, venture capitalist Tim Draper stated that in 2014 he won an auction for the sale of bitcoins confiscated from Silk Road. According to him, 30,000 BTC cost $18.74 million.

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