How Jimmy Zhong Got the Police Involved
The story began in March 2019 when Jimmy Zhong called the police in Athens, Georgia, to report that someone had stolen hundreds of thousands of dollars worth of cryptocurrency from his home. This phone call triggered an investigation into the theft. Initially, the police, who were used to college town-type crimes like break-ins, bar fights, and assorted rowdiness, couldn’t suspect Zhong’s crime. According to the report:
“The 911 call didn’t produce a suspect in the theft from Zhong’s house. Athens police were dealing with one of their first crypto cases and were unfamiliar with the shadowy underworld, and they failed to make progress in the case.”
$800 worth of Transactions Led to The Arrest
However, the investigation took some unexpected turns, involving a private investigator, Robin Martinelli, who usually handled cases like serving legal documents and investigating cheating spouses. Finally, the blockchain analytics company Chainalysis traced the digital wallets containing stolen funds from Silk Road and noticed a tiny mistake by the hacker.
The hacker transferred around $800 worth of BTC to a crypto exchange platform that was in compliance with the banking rules, including know your customer (KYC) processes.
This revealed the real names and addresses of the account holders, ultimately leading the United States Department of Justice (DOJ) to successfully arrest Zhong. Notably, in November 2021, the authorities seized the stolen bitcoin, which was worth $3.6 billion at the time, marking one of the largest individual bitcoin seizures in history.
Related reading: Uncle Sam as a Major Bitcoin Holder: A Controversial Supremacy
As a result of the legal proceedings, Zhong was charged with wire fraud. He pleaded guilty and was sentenced to a year and a day in federal prison. He also had to forfeit the bitcoin he stole in 2012. Currently, he is 33 years old and started serving his sentence at a federal prison camp in Montgomery, Alabama, on July 14, 2023.
Prosecutors argued that Zhong should receive a prison sentence for concealing his theft of bitcoin for nearly a decade, using mixers to obscure transactions. However, they recommended a sentence of less than two years, considering his youth, autism, and assistance in recovering the stolen bitcoin.
Zhong’s defense requested that he be spared from prison, highlighting his troubled upbringing in a dysfunctional family with little parental support. He was a victim of bullying due to his differences, including shyness, being overweight, and having undiagnosed autism.
In court, Zhong expressed regret for his actions, acknowledging the wrongfulness of his deeds, which he concealed while the value of bitcoin was rising. He admitted to feeling a false sense of importance and self-worth from his illicit activities.
Government’s Enormous Profit
Interestingly, Zhong’s attorney, Michael Bachner, pointed out in an interview with CNBC that the government profited significantly from this case. He explained that if the government had acquired the 50,000 BTC when the Silk Road operator, Ross Ulbricht, was arrested, they would have been worth approximately $320 per coin, totaling around $14 million. However, because Jimmy Zhong had them, the government ended up with a profit of $3 billion.
The report revealed that before his arrest, Zhong was known for living a lavish lifestyle, including hiring private jets and throwing extravagant parties. He even gifted his friends large sums of money.