The United States is seeking the forfeiture of more than $1bn in bitcoin stolen from the Silk Road online marketplace, federal prosecutors in Manhattan said on Monday.
In the second largest seizure in US Department of Justice history, Internal Revenue Service (IRS) agents obtained the 50,000 bitcoins 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 $3bn. 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 $3.3bn 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 more than two years in prison under recommended federal guidelines at his 22 February sentencing before US district judge Paul Gardephe, though prosecutors can seek a longer sentence.
He’s agreed to forfeit his stake in a real estate company, plus $661,900 and other items.
Zhong’s lawyer Michael Bachner said his client 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.