Zhong pleaded guilty Friday to one count of wire fraud, which could result in 20 years in prison.
On November 9, U.S authorities seized about 50,676 bitcoin from Zhong during a search of his house in Gainesville, Georgia. The total value of the bitcoin was almost $3.36 billion at the time of this seizure. It is the DOJ's second-largest financial seizure to date.
Authorities have accused Zhong of stealing Bitcoin from the illegal Silk Road, a dark web forum for buying drugs and other illicit products. The US government shut down the website in 2013, and its founder Ross Ulbricht is now serving imprisonment.
"Identity information of over 100 million people has now been hacked," Damian Williams, U.S. Attorney, said in a press release. "This could include email addresses, usernames, and passwords."
According to the Southern District of New York, Zhong took advantage of the vulnerabilities in the market to execute the hack.
According to the release from the IRS, Zhong used a sophisticated scheme to steal bitcoin from Silk Road. In September of 2012, he created nine fraudulent accounts on the marketplace and funded them with anywhere from 200 to 2,000 bitcoin each. Then over 140 transactions were triggered in rapid succession. This tricked the marketplace’s withdrawal-processing system into releasing approximately 50,000 bitcoin into his accounts. After making 140 transactions in rapid succession with small amounts of bitcoin, Zhong transferred all 50,000 bitcoins into separate wallet addresses that he controlled.
Blockchain analyses and good old-fashioned detective work allowed the police to recover more than 50,000 Bitcoin from Zhong. They even found cryptocurrency stored on a computer that was submerged under blankets in a popcorn tin in a bathroom closet, according to the press release.
Public records show Zhong was the president and CEO of a self-created company, and he registered in Georgia in 2014. According to his LinkedIn profile, his work there focused on "investments and venture capital."
His LinkedIn profile also states that he was an early bitcoin investor with extensive knowledge and experience in programming languages.
In addition to his luxurious Instagram posts, Zhong claims that he himself is enough of a millionaire.
Though the Silk Road was taken down, these types of hacking has not ended. Even though crypto platforms have made some improvements in safety and security, they are still vulnerable to criminals and hackers.
October of 2022 saw the largest crypto hack ever, led by Binance, the world’s number one exchange. One bug in a smart contract enabled hackers to drain their native cryptocurrency, called BNB tokens.
Large hacks have been occurring more and more often in the cryptocurrency world, but the largest hack to date was in March of 2022. The event involved a decentralized finance platform called Ronin Network and resulted in $600 million being stolen. The private keys, which serve as passwords to protect cryptocurrency funds in wallets, were compromised.
In just one year, Chainalysis has tracked $1.9 billion in stolen Bitcoin (BTC).
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