Silk Road Dark Web Thief Sentenced, Also Forced To Forfeit $3.4 Billion – eCrimeBytes Nibble #30

You may have heard of the Silk Road, an online dark web forum to purchase drugs and other illegal items or services. You may not have known that an individual named James Zhong managed to steal over $3.4 billion from the Silk Road.

I pulled the court documents (links below), but the best information I could find about how Zhong stole the Silk Road’s Bitcoin was written in a justice department press brief:

In September 2012, ZHONG executed a scheme to defraud Silk Road of its money and property by (a) creating a string of approximately nine Silk Road accounts (the “Fraud Accounts”) in a manner designed to conceal his identity; (b) triggering over 140 transactions in rapid succession in order to trick Silk Road’s withdrawal-processing system into releasing approximately 50,000 Bitcoin from its Bitcoin-based payment system into ZHONG’s accounts; and (c) transferring this Bitcoin into a variety of separate addresses also under ZHONG’s control, all in a manner designed to prevent detection, conceal his identity and ownership, and obfuscate the Bitcoin’s source.

…

ZHONG funded the Fraud Accounts with an initial deposit of between 200 and 2,000 Bitcoin. After the initial deposit, ZHONG then quickly executed a series of withdrawals. Through his scheme to defraud, ZHONG was able to withdraw many times more Bitcoin out of Silk Road than he had deposited in the first instance. As an example, on September 19, 2012, ZHONG deposited 500 Bitcoin into a Silk Road wallet. Less than five seconds after making the initial deposit, ZHONG executed five withdrawals of 500 Bitcoin in rapid succession — i.e., within the same second — resulting in a net gain of 2,000 Bitcoin. As another example, a different Fraud Account made a single deposit and over 50 Bitcoin withdrawals before the account ceased its activity. ZHONG moved this Bitcoin out of Silk Road and, in a matter of days, consolidated them into two high-value amounts.
https://www.justice.gov/usao-sdny/pr/us-attorney-announces-historic-336-billion-cryptocurrency-seizure-and-conviction

It sounds like Zhong was able to exploit some type of race condition that tricked the withdrawal system to deposit more Bitcoin than Zhong put into it.

The figure of $3.4 billion comes from the Justice Department’s calculations of what the stolen Bitcoin would be worth, conservatively, given the splits the coin has taken over the years.

Finally, in October 2022, nearly 10 years after the crime, Zhong was arrested. It looks like he pled guilty the same day.

The juiciest part of this case were the pictures from the search at Zhong’s house. First, a popcorn tin was found with a computer that had part of the crypto currency data on it: