300,900 Stolen USDT Wanted by U.S. Government

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  • The U.S. government is trying to get its hand on 300,900 USDT tokens that were reported stolen by two Binance users
  • The Chinese business partners bought the tokens on Binance and sent them to a wallet which was hacked in four minutes
  • The government claims the tokens are a result of fraud and must be forfeited

The U.S. government is trying to close out a claim of $300,900 in stolen USDT that it says is the result of fraud. The stolen USDT was frozen by Tether in April after the owners, a pair of Chinese citizens, reported the theft two months after it was taken. However, a court order saw the tokens transferred to a government-controlled USDT wallet following an attempt from a third party to obtain the tokens. The fate of the stolen USDT now rests with a California judge, who will decide who the rightful owners should be.

Tokens Lost After Private Key Kept on Evernote

The curious case started when two Chinese citizens, business partners Shixuan Cai and Lin Jian Chen, purchased 300,900 USDT tokens from Binance and sent them to a newly created crypto wallet in February. Unbeknownst to Cai however, Chen had stored the private keys to the wallet on Evernote, the non-cryptographic note taking app that was the undoing of Ian Balina back in 2018.

Hackers were quick to take advantage of the slip, tracking down the private key and rinsing Cai and Chen of their tokens just four minutes after they had hit their wallet. It took the pair until the next morning to notice the hack, but incredibly another two months to report the stolen USDT to Tether and the Los Angeles Police Department (LAPD) in early April.

Tether Freezes Tokens

Tether acted by freezing the stolen USDT, but nine days later received a request to lift the freeze. Tether identified the individual and passed his details on to the LAPD, who began discussions with the individual over the stolen USDT.

The man, who called himself Kamil, claimed he was a third business partner of Chen and Cai, and said that they had asked him to move the funds to an exchange to sell as they weren’t adept enough at doing it themselves (on which point he may actually have been right).

The LAPD refused the request and reported it to the United States District Court for The Central District Of California, where the judge issued a seizure notice for the stolen USDT. Tether duly complied and sent the funds to a U.S. Secret Service USDT wallet in July.

Government Wants its Cut – and More

The U.S. government is now claiming that the 300,900 stolen USDT tokens should be forfeited to them as the sum “constitutes or is derived from proceeds traceable to a violation of 18 U.S.C. § 1030 (Fraud and related activity in connection with computers).”

If Chen and Cai do end up losing their money to the government, it will be a very expensive lesson in proper wallet management – which includes not leaving your private keys written on anything that someone could access with a little digging and a VPN.