Bitcoin thief James Zhong sentenced to prison

James Zhong, 32, was sentenced Friday in New York federal courtroom, the place he pleaded responsible to wire fraud final yr. On the time of the heist in 2012, the Bitcoin was value $620,000. When authorities seized units holding the stolen Bitcoin in November 2021, its worth had exploded, making it the second-largest monetary seizure in US historical past.  

Earlier than he was caught, Zhong spent $16 million of the proceeds on actual property investments, luxurious motels, nightclubs and Lamborghinis, prosecutors stated. The worth of the Bitcoin seized is now about $1.56 billion. 

US District Choose Paul Gardephe cited the “extremely subtle nature of the crime” and Zhong’s lively concealment of the stolen Bitcoin for 9 years till brokers raided his home. Zhong confronted between 27 and 33 months in jail below advisory tips, however Gardephe stated he was granting leniency due to the “actually distinctive circumstances” within the case. Nonetheless, the choose stated he additionally needed to discourage different criminals. 

“Whereas the sufferer on this case occurred to be a legal enterprise, the sufferer tomorrow might be a official enterprise,” Gardephe stated. 

Prosecutors instructed the choose that Zhong ought to get jail as a result of he lined up his theft for practically a decade, shifting the Bitcoin by so-called mixers that make it more durable to hint transactions by jumbling tokens collectively. However additionally they stated he ought to get lower than two years in jail, citing his youth, his autism and his assist in recovering the stolen crypto. 

Solace in Laptop

Zhong’s legal professionals requested the choose to spare him a jail time period, saying he got here from a dysfunctional household and obtained no love from his divorced mother and father, who had been Chinese language immigrants. He was “severely bullied and victimized by his friends as a result of he was completely different — he was extraordinarily shy, chubby, and most importantly, suffered from undiagnosed autism spectrum dysfunction,” Zhong’s legal professionals stated in courtroom papers. “Having no buddies or household he might flip to, Jimmy discovered solace and friendship on the earth of his laptop.”

In courtroom, Zhong expressed “disgrace and regret,” and instructed the choose, “I all the time knew what I did was improper.” 

He stated he hid his crimes as Bitcoin soared in worth. 

“I feel I buried my head within the sand,” Zhong stated. “It made me really feel necessary and value one thing.” 

Zhong stated that whereas some faculty buddies have caught by him, the one who’s been most supportive is his canine Chad, who’s previous and sick. 

Of their sentencing memo, Zhong’s legal professionals argued that whereas he had no proper to the stolen Bitcoin, neither did Silk Highway. They stated {the marketplace} isn’t a sufferer “within the true sense of the phrase” below the legislation, noting that Silk Highway’s imprisoned founder, Ross Ulbricht, contacted Zhong and requested him how he took the cryptocurrency. However he by no means requested for it again — and despatched extra.

After pleading responsible, Zhong agreed to forfeit $42.7 million in addition to extra Bitcoin and property. 

The heist started after Zhong had saved some Bitcoin on Silk Highway, the net black market. When he double-clicked the withdrawal button by mistake, he acquired again twice as a lot as he put in. Over a number of days, he deposited extra tokens and rapidly withdrew them, double-clicking every time. Exploiting that glitch led him to greater than 50,000 Bitcoin, every value about $12 on the time. 

Federal brokers seized 50,491 Bitcoin from Zhong’s lakefront dwelling in Gainesville, Georgia, together with $661,900 in money and gold and silver bars. Zhong saved the crypto on units in a protected below floorboards and on a single-board laptop stowed in a Cheetos popcorn tin in a closet. He later surrendered greater than 1,000 extra Bitcoin. 

Zhong attended the College of Georgia from 2008 to 2014, incomes a bachelor’s diploma in laptop science and mining Bitcoin. He additionally drank excessively and used cocaine, based on a psychiatric examination report in his courtroom file. 

He transformed some Bitcoin to $700,000 in money, so he would have a “case full of cash like within the motion pictures,” the report stated. “He hoped the visible attraction of the money would impress a feminine into having sexual relations with him,” the report stated. “He said his plan didn’t work.”

In 2019, Zhong reported a housebreaking at his dwelling his Athens, Georgia, saying somebody had stolen a silver temporary case with $400,000 in money. 

The case is USA v. James Zhong, 22-cr-00606, US District Court docket, Southern District of New York (Manhattan).