Crypto News: Silk Road Hacker Faces a Year in Prison for Wire Fraud Scheme

The hacker who stole more than 50,000 bitcoin from the Silk Road darknet marketplace in 2012 has been sentenced to a year in prison for wire fraud. James Zhong, 32, pleaded guilty to the charge in January 2023, admitting that he exploited a vulnerability in the Silk Road’s withdrawal system to trick it into sending him large amounts of bitcoin.

Zhong created nine fake accounts on the Silk Road and used them to initiate 140 transactions that resulted in the transfer of 50,000 bitcoin to his own addresses. He then used a bitcoin mixing service and an international cryptocurrency exchange to launder the stolen funds and evade detection. He also obtained 50,000 Bitcoin cash (BCH) when Bitcoin forked in 2017 and exchanged them for 3,500 Bitcoin.

The Department of Justice (DOJ) for the Southern District of New York announced Zhong’s sentencing on April 14, 2023, stating that he had used “an impressive array of technological tools to frustrate tracing efforts”. The DOJ also revealed that federal authorities had seized approximately 51,351.89785803 bitcoin from Zhong on three separate occasions and $661,900 in cash, a stash of precious metals, and an 80% interest in a Memphis firm with substantial real estate holdings.

U.S. District Judge Paul G. Gardephe imposed a one-year prison sentence on Zhong, saying he had committed “a serious crime that undermined the integrity of a burgeoning technology”. The judge also ordered Zhong to forfeit his seized assets and pay the Silk Road victims restitution of $1.5 million.

Zhong’s case is one of several related to the Silk Road investigation, which led to the arrest and conviction of its founder Ross Ulbricht in 2015. Ulbricht is currently serving a life sentence without parole for operating the online marketplace facilitating the sale of illegal drugs and other goods and services using Bitcoin.