Mystery of stolen bitcoins worth over $3 billion solved with discovery of popcorn cans

U.S. Authorities Seize Bitcoins Stolen from 'Silk Road' Dark Web Marketplace by Hackers in 2012

The U.S. Department of Justice has revealed that it seized $3.36 billion worth of bitcoins last year that were stolen from Silk Road, a notorious dark web marketplace that has been shut down.

The 50,676 bitcoins were found hidden on various devices in a hacker's home, including a safe under the floor and inside a popcorn can. The hacker, James Zhong, pleaded guilty to hacking the bitcoins from the illegal Silk Road dark web marketplace in 2012.

The police raid on Zhong's Georgia home was conducted a year ago but is only now being disclosed. The seizure was the second-largest cryptocurrency seizure in history, the U.S. Department of Justice said. The seizure coincided with an all-time peak in bitcoin prices, but the seized bitcoin is now worth about $1.1 billion.

Officials said they found bitcoins scattered on hard drives and other storage devices in a safe under the floor of his home, as well as on a microcomputer hidden in a popcorn tin in a bathroom closet. In addition to the bitcoins, police also found $600,000 in cash in a safe under the floor.

In September 2012, he opened multiple accounts on dark web marketplaces and deposited small amounts of bitcoin into his digital wallet, police said. He then found a way to quickly withdraw a large amount of bitcoin and could avoid raising suspicion.

Zhong pleaded guilty on Nov. 4 to hacking the site and forfeited his bitcoins and assets to police while awaiting sentencing. He faces up to 20 years in prison.

Police used cryptocurrency tracking technology to locate the bitcoins, said, attorney Damian Williams. "For nearly 10 years, the whereabouts of this large chunk of missing bitcoin has ballooned into a mystery of more than $3.3 billion," he said, "This case shows that we won't stop tracking money, no matter how cleverly hidden, even down to the circuit board at the bottom of a popcorn can."

At the time, it was the largest cryptocurrency seizure in U.S. history, but it was subsequently surpassed when the U.S. Department of Justice seized more than $4 billion worth of bitcoin stolen in the 2016 Bitfinex hack in February of this year.

What is Silk Road?

"Silk Road was created and is run by Ross Ulbricht. He created this earliest dark web marketplace in 2011 to reflect his libertarian philosophy, and it operated from about 2011 to 2013. The dark web is a part of the Internet that can only be accessed using specialized software.

Ulbrich believes that governments inherently use force to impede the sovereignty of individuals - a sentiment he believes is reflected in the U.S. war on drugs. In this marketplace, drug dealers and other illegal suppliers use it to distribute large quantities of illegal drugs and other illegal goods and services to many buyers.

Notably, Silk Road explicitly prohibits the sale of products or services "for the purpose of harm or fraud," such as child pornography, weapons, or stolen credit cards. However, the U.S. government reported that hacking services were offered on the site.

In October 2013, Silk Road was shut down. At this time, the site had more than 100,000 users and thousands of transactions with tens of millions of dollars per day.

In 2015, Silk Road's founder, Ulbrich, was unanimously convicted by a jury of seven counts of running the Silk Road dark web marketplace and sentenced to life in prison without parole.

Silk Road and Bitcoin

"At the heart of Silk Road is the ability for buyers and sellers to hide their identities, and two key technologies act as anonymous proxies for the marketplace: Tor software and cryptocurrency (Bitcoin).

For the uninitiated, Silk Road is a dark web marketplace where users buy and sell a variety of products, including those considered illegal - most often drugs.

Proponents argue that Silk Road uses technology to create a marketplace that is necessarily separate from government and bank corruption. For critics, the marketplace is an enemy of the state, facilitating the sale of illegal substances and leading to the loss of countless lives.

However, for cryptocurrency proponents, the Silk Road marketplace is the first example of Bitcoin being used as an actual currency. Bitcoin became a means of exchange on the Silk Road marketplace. Tens of thousands of users used millions of dollars of bitcoin to purchase items on the Silk Road.

When Silk Road was shut down, 70,000 bitcoins were confiscated from the site. An appeal report detailed the volume of drug sales that occurred on Silk Road: marijuana transactions on Silk Road totaled more than $46 million, while heroin sales were approximately $8.9 million; cocaine sales totaled $17.4 million.