According to the Department of Justice, James Zhong illegally obtained over 50,000 Bitcoin back in September 2012, and to do this, he committed wire fraud on the dark web. The dark web is a series of networks that is much better concealed and anonymous than regular internet destinations. As a result, it’s often used for illegal reasons, such as selling drugs and weapons. Zhong used one of the illegal marketplaces present on the dark web at the time, known as Silk Road, to carry out the fraud — but he didn’t actually buy or sell anything in order to rack up the 50,000-Bitcoin fortune.
Zhong triggered very quick transactions that abused what seems to have been a bug in the Silk Road system, receiving much more Bitcoin than he initially deposited. Over a few days, he accumulated over 50,000 coins, back then only worth around $13 per coin (via Bankrate). Over the years, Zhong concealed a large portion of his fortune across multiple cold wallets; he also made a sizeable investment in a company and bought some precious metals. All of that was seized, and the defendant pled guilty to a charge of wire fraud. He is scheduled to be sentenced in February 2023.
Tyler Hatcher, the IRS-CI special agent in charge of the case, summed it up as such: “This case shows that we won’t stop following the money, no matter how expertly hidden, even to a circuit board in the bottom of a popcorn tin.”