Four years ago, a twenty-year-old man called the police to report that he had been the victim of a cryptocurrency theft at his home. But as the investigation developed, it became clear that the victim himself was a hardened criminal. The victim also stole the stolen coins. The story is intertwined, and it is the story of Jimmy Chung, the Silk Road thief.
The Silk Road was an online black market and the first market of the modern dark web. It was launched in 2011 by its American founder, Ross Ulbricht, who ran the entire market through his laptop. However, in October 2013, the FBI confiscated it.
Silk Road operates as a hidden service on the Tor network, allowing users to buy and sell products and services anonymously. All transactions were made using the cryptocurrency Bitcoin.
The site was also known for its illegal drug market, among other legal and illegal products. Between February 2011 and July 2013, the site facilitated sales of approximately 9.52 million bitcoins.
In October 2013, the FBI shut down Silk Road and arrested Ulbricht. He was convicted in 2015 in federal court on multiple charges related to the operation of Silk Road and sentenced to life in prison without the possibility of parole.
On March 19, 2019, 28-year-old Jimmy Chung called 911 to report a burglary at his home, claiming that hundreds of thousands of dollars worth of Bitcoin had been stolen. However, police ultimately failed to track down the culprit who stole the cryptocurrency from Chung’s home, believed to be around 150 bitcoins worth around $600,000 at the time. However, the investigation revealed a much bigger crime committed by Jimmy Chung himself.
Surprisingly, Chung had already stolen $3 billion worth of cryptocurrencies after hacking the Silk Road market in 2012. He called the police to report the theft of $600,000, despite there being a huge amount of incriminating evidence at his home. Furthermore, he admitted over the phone to investigators that he is a Bitcoin investor, putting himself on investigators’ radar.
Simply put, the US government charged James Chung with stealing more than 50,000 bitcoins from the illicit online marketplace Silk Road in 2012, with investigators tracking the trail of bitcoins and other cryptocurrencies owned by Chung since the beginning.
Classic American police trick catches a Silk Road fraudster
Specifically, in September 2019, Chainalysis identified a transaction from one of the hackers’ wallets in which $800 worth of Bitcoin was sent to an address controlled by a central cryptocurrency exchange.
The exchange, which adheres to “know your customer” processes, revealed that the address was linked to an account controlled by Zhong. This provided evidence that US tax authorities needed a real suspect, but it was not enough to prove Chung’s guilt.
Later, two tax agents and a police officer investigated Chung at his home, under the pretext of investigating the theft reported six months earlier. At that moment, Chung completely fell for the trick, and even told the trio that he would invite them to a party if they solved the problem, unaware that they were carrying hidden cameras.
Furthermore, investigators were able to get Chung to explain how he obtained his cryptocurrency holdings in the first place. He even revealed to them a Bitcoin wallet on his laptop containing over $60 million worth of Bitcoin!
Immediately thereafter, investigators obtained a search warrant for Chung’s home. On November 9, 2021, officers raided the home and found secret wallets containing millions of dollars worth of bitcoin, including coins attributed to the Silk Road hack.
Chung was eventually charged with wire fraud, and pleaded guilty. His prison sentence began on July 14, 2023, in Montgomery, Alabama.