Skip to main content

[](/usao "Office of the United States Attorneys")
[](/ "The United States Department of Justice")

[](/usao-sdny)

Search form
-----------

Southern District of New York
-----------------------------

-   [HOME](/usao-sdny)
-   [About](/usao-sdny/about)
   -   [U.S. Attorney](/usao-sdny/meet-us-attorney)
   -   [Senior Leadership](/usao-sdny/senior-leadership)
   -   [Office History](/usao-sdny/office-history)
   -   [About the District](/usao-sdny/about-district)
   -   [Divisions](/usao-sdny/divisions)
       -   [Civil Division](/usao-sdny/civil-division)
       -   [Criminal Division](/usao-sdny/criminal-division)
-   [Priorities](/usao-sdny/priorities)
   -   [Terrorism & Sanctions
       Enforcement](/usao-sdny/thwarting-and-prosecuting-acts-terror-and-enforcing-international-sanctions)
   -   [The Opioid Crisis](/usao-sdny/combating-opioid-crisis-0)
   -   [Human Trafficking & Child Sexual
       Exploitation](/usao-sdny/human-trafficking-and-sexual-exploitation-minors)
   -   [Gun & Gang-Related
       Violence](/usao-sdny/combatting-gun-and-gang-related-violence)
   -   [Public
       Corruption](/usao-sdny/holding-corrupt-public-officials-accountable)
   -   [Fraud](/usao-sdny/prosecuting-fraud)
   -   [State-Sponsored
       Cybercrime](/usao-sdny/countering-state-sponsored-cybercrime)
   -   [Environment & Public
       Health](/usao-sdny/protecting-environment-and-public-health-and-pursuing-environmental-justice)
   -   [Civil Rights](/usao-sdny/protecting-civil-rights)
   -   [Animal
       Cruelty](/usao-sdny/animal-cruelty "Prosecuting Animal Cruelty")
   -   [Conviction
       Integrity](/usao-sdny/conviction-integrity-committee)
-   [News](/usao-sdny/news)
   -   [Press Releases](/usao-sdny/pr)
   -   [Press
       Conferences](https://www.justice.gov/usao-sdny/press-conferences)
   -   [Speeches](/usao-sdny/speeches)
   -   [Gallery](/usao-sdny/video-photo-gallery)
-   [Resources](https://www.justice.gov/usao-sdny)
   -   [Department of Justice Harassment Prevention
       Resource](https://www.justice.gov/file/1200951/download)
   -   [SDNY Weekly Court
       Calendar](http://www.nysd.uscourts.gov/events-exhibits.php)
-   [Programs](/usao-sdny/programs)
   -   [Reentry Program](/usao-sdny/reentry-program)
   -   [Community Outreach](/usao-sdny/programs/community-outreach)
   -   [Victim Witness
       Assistance](/usao-sdny/programs/victim-witness-services)
-   [Employment](/usao-sdny/employment)
   -   [Benefits](/usao-sdny/benefits)
   -   [Diversity](/usao-sdny/diversity)
   -   [Assistant U.S. Attorneys](/usao-sdny/assistant-usa-employment)
   -   [Support Staff](/usao-sdny/support-staff)
   -   [Law Student Intern Program](/usao-sdny/law-student-internships)
   -   [Undergraduate
       Internships](/usao-sdny/undergraduate-internships)
   -   [Monitors, Receivers, Claims
       Admin](/usao-sdny/monitors-receivers-claims-administrators)
-   [Contact](/usao-sdny/contact-us)
   -   [Report Crime](/usao-sdny/report-crime)
   -   [Civil Rights](/usao-sdny/civil-rights)

You are here
------------

[U.S. Attorneys](/usao) » [Southern District of New York](/usao-sdny) »
[News](/usao-sdny/news) » [Press Releases](/usao-sdny/pr)


Justice News
============

Share
-   [Facebook](http://www.facebook.com/sharer/sharer.php?u=https://www.justice.gov/usao-sdny/pr/silk-road-dark-web-fraud-defendant-sentenced-following-seizure-and-forfeiture-over-34 "Share on Facebook")
-   [Twitter](http://twitter.com/intent/tweet?url=https://www.justice.gov/usao-sdny/pr/silk-road-dark-web-fraud-defendant-sentenced-following-seizure-and-forfeiture-over-34&text=Silk%20Road%20Dark%20Web%20Fraud%20Defendant%20Sentenced%20Following%20Seizure%20And%20Forfeiture%20Of%20Over%20%243.4%20Billion%20In%20Cryptocurrency "Share on Twitter")
-   [LinkedIn](http://www.linkedin.com/shareArticle?mini=true&url=https://www.justice.gov/usao-sdny/pr/silk-road-dark-web-fraud-defendant-sentenced-following-seizure-and-forfeiture-over-34&title=Silk%20Road%20Dark%20Web%20Fraud%20Defendant%20Sentenced%20Following%20Seizure%20And%20Forfeiture%20Of%20Over%20%243.4%20Billion%20In%20Cryptocurrency "Share on LinkedIn")
-   [Digg](http://digg.com/submit?url=https://www.justice.gov/usao-sdny/pr/silk-road-dark-web-fraud-defendant-sentenced-following-seizure-and-forfeiture-over-34&title=Silk%20Road%20Dark%20Web%20Fraud%20Defendant%20Sentenced%20Following%20Seizure%20And%20Forfeiture%20Of%20Over%20%243.4%20Billion%20In%20Cryptocurrency "Share on Digg")
-   [Reddit](http://reddit.com/submit?url=https://www.justice.gov/usao-sdny/pr/silk-road-dark-web-fraud-defendant-sentenced-following-seizure-and-forfeiture-over-34&title=Silk%20Road%20Dark%20Web%20Fraud%20Defendant%20Sentenced%20Following%20Seizure%20And%20Forfeiture%20Of%20Over%20%243.4%20Billion%20In%20Cryptocurrency "Share on Reddit")
-   [Pinterest](http://pinterest.com/pin/create/button/?url=https://www.justice.gov/usao-sdny/pr/silk-road-dark-web-fraud-defendant-sentenced-following-seizure-and-forfeiture-over-34&media=https%3A//www.justice.gov/sites/all/modules/features/doj_sharing/images/doj-seal-pin.png&title=Silk%20Road%20Dark%20Web%20Fraud%20Defendant%20Sentenced%20Following%20Seizure%20And%20Forfeiture%20Of%20Over%20%243.4%20Billion%20In%20Cryptocurrency "Share on Pinterest")
-   [Email](mailto:?body=https://www.justice.gov/usao-sdny/pr/silk-road-dark-web-fraud-defendant-sentenced-following-seizure-and-forfeiture-over-34&subject=Silk%20Road%20Dark%20Web%20Fraud%20Defendant%20Sentenced%20Following%20Seizure%20And%20Forfeiture%20Of%20Over%20%243.4%20Billion%20In%20Cryptocurrency "Email")

<span class="rdf-meta element-hidden" property="dc:title"
content="Silk Road Dark Web Fraud Defendant Sentenced Following Seizure And Forfeiture Of Over $3.4 Billion In Cryptocurrency">
Department of Justice

U.S. Attorney’s Office

Southern District of New York

------------------------------------------------------------------------

FOR IMMEDIATE RELEASE

<span class="date-display-single" property="dc:date"
datatype="xsd:dateTime" content="2023-04-14T00:00:00-04:00">Friday,
April 14, 2023

Silk Road Dark Web Fraud Defendant Sentenced Following Seizure And Forfeiture Of Over $3.4 Billion In Cryptocurrency
====================================================================================================================

Damian Williams, the United States Attorney for the Southern District of
New York, announced that JAMES ZHONG was sentenced today to one year and
one day in prison for committing wire fraud in September 2012 when he
unlawfully obtained approximaely 50,000 Bitcoin from the Silk Road dark
web internet marketplace.  United States District Judge Paul G. Gardephe
imposed today’s sentence. 

As part of the ZHONG investigation, the Government has obtained final
orders of forfeiture for, among other items, 51,680.32473733 Bitcoin,
valued at over $3.4 billion at the time of seizure and over $1.57
billion today.  

U.S. Attorney Damian Williams said: “Back in 2012, James Zhong committed
wire fraud by stealing 50,000 Bitcoin from Silk Road, and for the next
10 years, he managed to conceal what he had done and how he obtained his
fortune.  Zhong used a decentralized Bitcoin mixer, an overseas
cryptocurrency exchange, and an impressive array of technological tools
to frustrate tracing efforts.  But thanks to the relentless and skillful
efforts of law enforcement in following the money, the federal
government uncovered Zhong’s scheme and obtained final orders of
forfeiture for over 51,680 Bitcoin.  Cyber-criminals should heed this
message: we will follow the money and hold you accountable, no matter
how sophisticated your scheme and no matter how long it takes.” 

According to court filings and statements made in court proceedings:

ZHONG’s Scheme to Defraud

Silk Road was an online “darknet” black market.  In operation from
approximately 2011 until 2013, Silk Road was used by numerous drug
dealers and other unlawful vendors to distribute massive quantities of
illegal drugs and other illicit goods and services to many buyers and to
launder all funds passing through it.  In 2015, following a
groundbreaking prosecution by this Office, Silk Road’s founder Ross
Ulbricht was convicted by a unanimous jury and sentenced to life in
prison.  *United States v. Ulbricht*, 14-cr-68 (S.D.N.Y.). 

In September 2012, ZHONG executed a scheme to defraud Silk Road of its
money and property by (i) creating a string of approximately nine Silk
Road accounts (the “Fraud Accounts”) in a manner designed to conceal his
identity; (ii) triggering over 140 transactions in rapid succession in
order to trick Silk Road’s withdrawal-processing system into releasing
approximately 50,000 Bitcoin from its Bitcoin-based payment system into
ZHONG’s accounts; and (iii) transferring this Bitcoin into a variety of
separate addresses also under ZHONG’s control, all in a manner designed
to prevent detection, conceal his identity and ownership, and obfuscate
the Bitcoin’s source. 

While executing the September 2012 fraud, ZHONG did not list any item or
service for sale on Silk Road, nor did he buy any item or service on
Silk Road.  ZHONG registered the accounts by providing the bare minimum
of information required by Silk Road to create the account; the Fraud
Accounts were merely a conduit for ZHONG to defraud Silk Road of
Bitcoin.

ZHONG funded the Fraud Accounts with an initial deposit of between 200
and 2,000 Bitcoin.  After the initial deposit, ZHONG then quickly
executed a series of withdrawals.  Through his scheme to defraud, ZHONG
was able to withdraw many times more Bitcoin out of Silk Road than he
had deposited in the first instance.  As an example, on September 19,
2012, ZHONG deposited 500 Bitcoin into a Silk Road wallet.  Less than
five seconds after making the initial deposit, ZHONG executed five
withdrawals of 500 Bitcoin in rapid succession — *i.e.*, within the same
second — resulting in a net gain of 2,000 Bitcoin.  As another example,
a different Fraud Account made a single deposit and over 50 ** Bitcoin
withdrawals before the account ceased its activity.  ZHONG moved this
Bitcoin out of Silk Road and, in a matter of days, consolidated them
into two high-value amounts.

Nearly five years after ZHONG’s fraud, in August 2017, solely by virtue
of ZHONG’s possession of the 50,000 Bitcoin that he unlawfully obtained
from Silk Road, ZHONG received a matching amount of a related
cryptocurrency — 50,000 Bitcoin Cash (“BCH Crime Proceeds”) — on top of
the 50,000 Bitcoin.  In August 2017, in a hard fork coin split, Bitcoin
split into two cryptocurrencies, traditional Bitcoin and Bitcoin Cash
(“BCH”).  When this split occurred, any Bitcoin address that had a
Bitcoin balance (as ZHONG’s addresses did) now had the exact same
balance on both the Bitcoin blockchain and on the Bitcoin Cash
blockchain.  As of August 2017, ZHONG thus possessed 50,000 BCH in
addition to the 50,000 Bitcoin that ZHONG unlawfully obtained from Silk
Road.  ZHONG thereafter exchanged through an overseas cryptocurrency
exchange all of the BCH Crime Proceeds for additional Bitcoin, amounting
to approximately 3,500 Bitcoin of additional crime proceeds. 
Collectively, by the last quarter of 2017, ZHONG thus possessed
approximately 53,500 Bitcoin of total crime proceeds (the “Crime
Proceeds”).

The Government’s Seizure of Over 50,000 Bitcoin

On November 9, 2021, pursuant to a judicially authorized premises search
warrant, law enforcement agents recovered approximately 50,491.06251844
Bitcoin of crime proceeds from ZHONG’s Gainesville, Georgia, house.  Law
enforcement located these crime proceeds in an underground floor safe
and on a single-board computer that was submerged under blankets in a
popcorn tin stored in a bathroom closet.  In addition, law enforcement
recovered $661,900 in cash, 25 Casascius coins (physical bitcoin) with
an approximate value of 174 Bitcoin, 11.1160005300044 additional
Bitcoin, four one-ounce silver-colored bars, three one-ounce
gold-colored bars, four 10-ounce silver-colored bars, and one
gold-colored coin.  Photographs of the popcorn tin, single-board
computer, underground floor safe, and some of the seized items are
included below:



 



 



 



Beginning in or around March 2022, ZHONG began voluntarily surrendering
to the Government additional Bitcoin that ZHONG had access to and had
not dissipated.  In total, ZHONG voluntarily surrendered 1,004.14621836
additional Bitcoin.

Using a conservative estimate of the lowest spot price of Bitcoin on the
seizure dates, the total value of all Bitcoin seized for which the
Government has obtained final orders of forfeiture is approximately $3.4
billion. 

Forfeiture Actions

On February 7, 2023, in *United States v. Ross Ulbricht*, S1 14 Cr. 68
(S.D.N.Y.), District Judge Lorna G. Schofield entered a final order of
forfeiture as to the below property seized from ZHONG, vesting all
right, title, and interest in the below property in the United States:

-   50,491.06251844 Bitcoin seized from ZHONG’s home on November 9,
   2021;
-   825.38833159 Bitcoin provided by ZHONG on March 25, 2022; and
-   35.4470080 Bitcoin provided by ZHONG on May 25, 2022.

On March 14, 2023, District Judge Gardephe entered a final order of
forfeiture as to the below property, vesting all right, title, and
interest in the below property in the United States:

-   ZHONG’s 80% interest in RE&D Investments, LLC, a Memphis-based
   company with substantial real estate holdings;
-   $661,900 in United States currency seized from ZHONG’s home on
   November 9, 2021;
-   Metal items, consisting of four one-ounce silver-colored bars, three
   one-ounce gold-colored bars, four 10-ounce silver-colored bars, and
   one gold-colored coin, all seized from ZHONG’s home on November 9,
   2021;
-   11.1160005300044 Bitcoin seized from ZHONG’s home on November 9,
   2021;
-   25 Casascius coins (physical Bitcoin) with an approximate value of
   174 Bitcoin, collectively, seized from ZHONG’s home on November 9,
   2021;
-   23.7112850 Bitcoin provided by ZHONG on April 27, 2022;
-   115.02532155 Bitcoin provided by ZHONG on April 28, 2022; and
-   4.57427222 Bitcoin provided by ZHONG on June 8, 2022.

\*                \*                \*

ZHONG, 32, of Gainesville, Georgia, and Athens, Georgia, previously pled
guilty to one count of wire fraud before Judge Gardephe.

Mr. Williams praised the outstanding work of the Internal Revenue
Service, Criminal Investigation’s Western Cyber Crimes Unit of the Los
Angeles Field Office.  Mr. Williams also thanked the Athens-Clarke
County Police Department in Athens, Georgia, for its support and
assistance with the case.  

The prosecution of this case is being overseen by the Office’s Money
Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S.
Attorney David R. Felton is in charge of the case.

Topic(s): 

Asset Forfeiture

Financial Fraud

Component(s): 

[USAO - New York, Southern](http://www.justice.gov/usao-sdny)

Contact: 

Nicholas Biase (212) 637-2600

Press Release Number: 

23-139

Updated April 14, 2023

Twitter URL: 

[Follow us on
Twitter...](http://twitter.com/SDNYNews "Follow us on Twitter")

Facebook URL: 

[Follow us on
Facebook...](https://www.facebook.com/usaosdny/ "Follow us on Facebook")

Youtube URL: 

[Follow us on
YouTube...](http://www.youtube.com/user/usaosdny "Follow us on YouTube")

RSS URL: 

[Follow us on
RSS...](http://www.justice.gov/feeds/justice-news.xml?type%5Bpress_release%5D=press_release&component%5B1981%5D=1981&&organization=186051 "Follow us on RSS")

 



[Click here to report information on Amazon
warehouses.](/usao-sdny/webform/sdny-amazon-warehouse-investigation)



[Click here for information on the investigation into the Mount Vernon
Police
Department](/usao-sdny/doj-opens-pattern-or-practice-investigation-mount-vernon-police-department)

[](/voting#NY)

Solarwinds Intrusion
--------------------

This Office was one of the districts affected by the SolarWinds
intrusion.

[Please click here for further
information.](/opcl/department-justice-statement-intrusion-department-s-microsoft-o365-email-environment)

[](/usao/justice-101)



[Public Service Announcement on Sexual Assault in Public Housing](https://www.justice.gov/usao-sdny/video/public-service-announcement-sexual-harassment-housing)
----------------------------------------------------------------------------------------------------------------------------------------------------------------



[Public Service Announcement on Sexual Assault in Public
Housing](/usao-sdny/video/public-service-announcement-sexual-harassment-housing)

[![Community
Outreach](/sites/default/files/usao-sdny/fieldable-panel-panes/basic-panes/images/2015/02/19/icon_community-large.gif "Community Outreach")](/usao-sdny/programs/community-outreach)

Giving back to the community through a variety of venues &
initiatives.
 

[![Learn
More](/sites/default/files/usao-sdny/fieldable-panel-panes/basic-panes/images/2015/02/19/learn_more_button_gray.png "Learn More")](/usao-sdny/programs/community-outreach)

[![Victim Witness
Assistance](/sites/default/files/usao-sdny/fieldable-panel-panes/basic-panes/images/2015/02/19/icon_vwa.gif "Victim Witness Assistance")](/usao-sdny/programs/victim-witness-services)

Making sure that victims of federal crimes are treated with compassion,
fairness and respect.
 

[![Learn
More](/sites/default/files/usao-sdny/fieldable-panel-panes/basic-panes/images/2015/02/19/learn_more_button_gray.png "Learn More")](/usao-sdny/programs/victim-witness-services)

[](http://www.justice.gov/usao-es)

### **Southern District of New York**

One St. Andrews Plaza - New York, NY 10007

U.S. DEPARTMENT OF JUSTICE
--------------------------

-   Left
   -   [Accessibility](/usao/accessibility)
   -   [FOIA](http://www.justice.gov/usao/resources/)
   -   [Privacy Policy](/doj/privacy-policy)
   -   [Legal Policies & Disclaimers](/legalpolicies)
-   Right
   -   [Justice.gov](/)
   -   [USA.gov](http://www.usa.gov)
   -   [Vote.gov](https://www.vote.gov)

Southern District of New York
-----------------------------

-   [HOME](/usao-sdny)
-   [About](/usao-sdny/about)
   -   [U.S. Attorney](/usao-sdny/meet-us-attorney)
   -   [Senior Leadership](/usao-sdny/senior-leadership)
   -   [Office History](/usao-sdny/office-history)
   -   [About the District](/usao-sdny/about-district)
   -   [Divisions](/usao-sdny/divisions)
       -   [Civil Division](/usao-sdny/civil-division)
       -   [Criminal Division](/usao-sdny/criminal-division)
-   [Priorities](/usao-sdny/priorities)
-   [News](/usao-sdny/news)
   -   [Press Releases](/usao-sdny/pr)
   -   [Press
       Conferences](https://www.justice.gov/usao-sdny/press-conferences)
   -   [Speeches](/usao-sdny/speeches)
   -   [Gallery](/usao-sdny/video-photo-gallery)
-   [Resources](https://www.justice.gov/usao-sdny)
   -   [Department of Justice Harassment Prevention
       Resource](https://www.justice.gov/file/1200951/download)
   -   [SDNY Weekly Court
       Calendar](http://www.nysd.uscourts.gov/events-exhibits.php)
-   [Programs](/usao-sdny/programs)
   -   [Reentry Program](/usao-sdny/reentry-program)
   -   [Community Outreach](/usao-sdny/programs/community-outreach)
   -   [Victim Witness
       Assistance](/usao-sdny/programs/victim-witness-services)
-   [Employment](/usao-sdny/employment)
   -   [Benefits](/usao-sdny/benefits)
   -   [Diversity](/usao-sdny/diversity)
   -   [Assistant U.S. Attorneys](/usao-sdny/assistant-usa-employment)
   -   [Support Staff](/usao-sdny/support-staff)
   -   [Law Student Intern Program](/usao-sdny/law-student-internships)
   -   [Undergraduate
       Internships](/usao-sdny/undergraduate-internships)
   -   [Monitors, Receivers, Claims
       Admin](/usao-sdny/monitors-receivers-claims-administrators)
-   [Contact](/usao-sdny/contact-us)
   -   [Report Crime](/usao-sdny/report-crime)
   -   [Civil Rights](/usao-sdny/civil-rights)

You are viewing proxied material from 1436.ninja. The copyright of proxied material belongs to its original authors. Any comments or complaints in relation to proxied material should be directed to the original authors of the content concerned. Please see the disclaimer for more details.