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Where would you hide $3.4 billion worth of Bitcoin? For James Zhong, the ideal spot was to store it on a computer \u2014 with its circuitry exposed \u2014 placed in a used Cheetos popcorn tin hidden in a bathroom closet under a pile of blankets.<\/strong><\/p>\nZhong, now 32, was sentenced to a year in federal prison last month for a hack that took place almost 11 years ago. His victim? Ross Ulbricht, the proprietor of the Silk Road dark web drug marketplace where Bitcoin found its first significant use case, as an underground currency. Today, Ulbricht is himself serving two life sentences plus 40 years for his part in operating the illegal marketplace, but darknet markets continue to flourish.<\/p>\n
Somewhat ironically, billionaire Zhong was caught due to a transfer of just $1,000 worth of BTC to an address he\u2019d used previously.<\/p>\nProsecutors stated that Zhong spent lavishly on luxuries. (Zhong\u2019s social media<\/em>)Lifestyle of a crypto billionaire<\/h2>\n How much is $3.4 billion? One could build another Burj Khalifa \u2014 the world\u2019s tallest tower, located in Dubai ($1.5 billion) \u2014 and make the winning bid on Leonardo da Vinci\u2019s \u201cSalvator Mundi\u201d \u2014 the most expensive painting ever sold ($450 million) \u2014 and still have over a billion left over to purchase a sports team, yacht and fleet of private jets. It\u2019s almost beyond comprehension.<\/p>\nThe computer containing most of Zhong\u2019s Bitcoin, found in a popcorn tin. (United States Department of Justice<\/em>)<\/figcaption><\/figure>\nBut Zhong lived in the American city of Gainesville, Georgia, where around $1 million is enough to purchase the luxurious four-bedroom lakefront property he called home. According to some sources, gaining attention from women was among the key motivations of Zhong \u2014 who is autistic and was reportedly bullied in school. Court documents hint at his lavish lifestyle:<\/p>\n
\u201cIndeed, in the 51 months before law enforcement\u2019s overt search of Zhong\u2019s residences, Zhong dissipated approximately $16 million of crime proceeds, spending lavishly on real estate investments, luxury products, travel, hotels, nightclubs, and other expenses.\u201d<\/p>\n
If his online posts are anything to go by, Zhong can also be said to have been something of a party animal, using cocaine on weekends and bragging about being drunk while keeping an eye on the markets. Perhaps this comes with the territory of stealing billions from a drug kingpin.<\/p>\nZhong memed about his party habits on the Bitcointalk forum.<\/em><\/figcaption><\/figure>\nAll this was presumably financed with the roughly 2,900 BTC that the government did not recover from his theft. Zhong stole 50,000 BTC and converted his free Bitcoin Cash into another 3,500 BTC. However, only 50,591 BTC was seized.<\/p>\n
Silk Road<\/h2>\n Where did all this begin? Possibly with a Bitcointalk user named Teppy, who in June 2010 made a post titled \u201cA Heroin Store\u201d outlining \u201ca thought experiment about how a heroin store might operate, accepting Bitcoins, and ending drug prohibition in the process.\u201d The post connected Bitcoin to libertarianism and suggested that this would enable the new currency to become \u201ctruly disruptive.\u201d<\/p>\n
It was a cutting-edge concept. \u201cPizza Day,\u201d which saw Bitcoin exchanged for real-world goods for the first time \u2014 a pair of pizzas for 10,000 BTC \u2014 had happened just three weeks prior.<\/p>\n\n\n
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Eight months later, in February 2011, Silk Road opened for business in the hidden back alleys of the web. \u201cTo access the Tor dark web, users need to download special software,\u201d explains Ethan Lou, an occasional Magazine contributor and the author of Once a Bitcoin Miner<\/em>. He speaks from experience. Tor, he notes, has many legitimate uses for those who value privacy, including leaking information to the press.<\/p>\n\n\u201cIt\u2019s pretty easy if you have some basic tech know-how. Once you get in, you see that it looks like the internet from the 1990s.\u201d<\/p>\n<\/blockquote>\n
Sellers could list their items for sale on Silk Road, and the website would hold funds in escrow until items were received by the buyer, who could rate the item and seller. Often, administrators would adjudicate disputes. In months, the site grew to host over 10,000 listings of controlled substances, eventually processing around 1.5 million transactions. One early user was podcaster Peter McCormack, who called it \u201cAmazon for drugs\u201d and told Magazine how he wound up in hospital after three grams of cocaine arrived one day and he got carried away \u2014 literally, in an ambulance.<\/p>\n
Authorities close in<\/h2>\n By June, U.S. Senators Chuck Schumer and Joe Manchin had written to the attorney general and the Drug Enforcement Agency, demanding they take action against the marketplace.<\/p>\n
Some of those actions were off-the-books, such as those by DEA Special Agent Carl Mark Force IV, the \u201clead undercover agent\u201d who in 2015 was sentenced to 6.5 years for various crimes connected with the case. This included demanding exchanges freeze BTC accounts in order to withdraw the coins for himself as well as faking the death of site administrator Curtis Green, whom he had actually arrested, in order to collect money from DPR, who allegedly wanted him dead.<\/p>\nZhong had autism, and prosecutors said he spent lavishly. (Social media)<\/em><\/figcaption><\/figure>\nThe website came to an end on Oct. 1, 2013, when a couple started bickering in San Fransisco\u2019s Glen Park Library. This caught the attention of the nearby Ulbricht, who turned his head from the laptop he was working on. It was a trap. At that moment, FBI agents swooped in from behind bookshelves and grabbed Ulbricht\u2019s laptop before he could log out and lock away his 144,000 BTC \u2014 the proof he was DPR.<\/p>\n
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Read also<\/p>\n
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Features<\/span><\/p>\n\u2018Deflation\u2019 is a dumb way to approach tokenomics\u2026 and other sacred cows<\/p>\n<\/p><\/div>\n
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Features<\/span><\/p>\nCrypto is changing how humanitarian agencies deliver aid and services<\/p>\n<\/p><\/div>\n<\/div>\n<\/div>\n
Ulbricht received a double life sentence plus 40 years with no possibility of parole. Many in the Bitcoin community and beyond have criticized the sentence as unjust, particularly considering the nonviolent nature of his crime. FreeRoss, an organization dedicated to advocating for his release, archives statements by politicians and industry leaders speaking in favor of his release. As Lou asks:<\/p>\n
\u201cAre two life sentences reasonable for someone who did something that is nonviolent?\u201d<\/p>\n\n\n
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