- The IRS last year seized $3.36 billion worth of bitcoin from a Silk Road hacker
- The seizure, publicized yesterday, is the biggest value currency grab in U.S. history
- The U.S. government now owns 1% of all the bitcoin ever mined
The Inland Revenue Service (IRS) yesterday revealed that in 2021 it seized a staggering $3.36 billion worth of bitcoin from a Silk Road hacker, leaving the government holding around 1% of the entire bitcoin supply. The haul, which included bitcoin on cold wallets and in Casascius coins, belonged to a man named James Zhong, who has pleaded guilty to wire fraud nine years after stealing more than ₿50,000 from Silk Road. The news comes a year after ₿69,370 was taken from another Silk Road thief, thought to be a Secret Service agent working on the case.
Biggest Ever Currency Seizure
Zhong’s holding was so vast that, at the time of the seizure in late 2021, it represented the biggest-ever Justice Department seizure of any kind of currency, let alone cryptocurrencies. The IRS revealed that the bitcoin was ultimately found stored on a “single-board computer” hidden in a popcorn can, along with more than $600,000 in cash and precious metals, all held in a safe under the floorboards of a closet in Zhong’s bathroom.
According to court documents, Zhong was able to take advantage of a vulnerability in the Silk Road code in 2012 that allowed him to withdraw more coins out of accounts he created than he had deposited. These rapid-fire withdrawals did not require confirmation that the requested money still existed in his account. Silk Road was famously riddled with bugs that allowed theft of bitcoin, and Zhong was one of those who took full advantage.
Zhong’s actions post-hack typify the crypto thief’s dilemma – had he tried to cash them out they would almost certainly have been linked to him, leading to him being forced to leave the vast majority totally untouched all these years. However, it seems that he wasn’t able to resist when he was given over 50,000 Bitcoin Cash coins after the Bitcoin fork in August 2017, as it was an unnamed exchange account that was his undoing – the IRS, working with Chainalysis, were able to link some of the coins to him through the exchange, which in turn led to his house being raided and the $3.36 billion haul being found.
U.S. Government Now Owns 1% Of All Bitcoin
Zhong’s bitcoin will be added to the ₿69,370 taken from someone named only as Individual X who, in February last year, was identified as another Silk Road thief. However, Fortune claimed at the time that this could have been disgraced Secret Service agent Shaun Bridges, who worked on the Silk Road case but was imprisoned for conducting his own criminal enterprise on the back of it, stealing the bitcoin and seemingly determined to keep hold of the ₿69,370 until he was out of prison.
The impounding of Zhong’s bitcoin means that the U.S. government now owns a total of 214,000+ bitcoin, meaning that it now holds over 1% of all bitcoin ever created. This bitcoin will likely be auctioned off as in the past once all trials and appeals have been heard.
