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US Attorney Announces Guilty Plea of Criminal Who Stole 50,000 Bitcoin from Silk Road

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US Attorney Announces Guilty Plea of Criminal Who Stole 50,000 Bitcoin from Silk Road

Silk Road fraudster James Zhong pleaded guilty to stealing 50,000 BTC from the Silk Road darknet marketplace in 2012.

According to the U.S. Justice Department, Zhong created 140 transactions that caused Silk Road’s withdrawal processing system to deposit 50,000 BTC into his nine accounts.

Lead up to Zhong’s plea

Zhong’s guilty plea follows a seizure of roughly 50,676 BTC ($3.3 billion) by law enforcement in Nov. 2021 from his home in Gainesville, Georgia. Zhong deposited between 200 and 2000 BTC into each of his Silk Road accounts. He then made a series of rapid withdrawals within seconds of the deposits. After that, he transferred this money out of Silk Road and consolidated the funds into two large amounts.

When the Bitcoin blockchain split to create the Bitcoin Cash hard fork in 2017, Zhong received 50,000 BCH. He converted BCH to Bitcoin using overseas exchanges. This conversion took his Bitcoin holdings to 53,500 BTC, called the “Crime Proceeds,” according to the DoJ.

When law enforcement raided Zhong’s home in 2021, they found the wallet keys for 50,591 of the 53,500 BTC in an underground safe and a computer board. Additionally, they seized over $600,000 in cash, 25 physical Bitcoin, and several precious metals. Later, Zhong voluntarily handed over about 1,004 additional Bitcoin.

Zhong could face up to 20 years in prison for his crime and will face sentencing on Feb. 22, 2023.

The curious spate of Silk Road thefts

Silk Road was an online darknet marketplace founded by convicted criminal Ross Ulbricht. It peddled illicit items for Bitcoin between 2011 and 2013. A jury unanimously convicted Ulbricht in 2015, and he was sentenced to life in prison. Since then, authorities have cracked down on at least two cases of theft from the Silk Road, of which Zhong’s is the most recent.

When authorities arrested Ulbricht in a San Francisco library, they found crypto keys for only 174,000 BTC(about $105 million) of the 614,000 BTC commissions earned during Silk Road’s two-year operation.

Crypto keys are long strings of letters and numbers that authorize users to transact on a blockchain. A crypto user uses a private key to spend crypto. They use a public key to send crypto. 

Fast forward to Nov. 2020, crypto forensics firm Elliptic spotted that someone moved 70,000 BTC from a wallet address 1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbh. The address is believed to belong to Silk Road because it had received funds from an address belonging to Silk Road in 2013. 

Silk Road
Source: Blockchair

The keys to 1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbh had reportedly been circulating on hacker forums, embedded in an encrypted file. Since Ulbricht was in prison, he couldn’t have moved the funds. Instead, a hacker likely cracked the encrypted file to access the funds. Analytics firm Chainalysis identified that the hacker had started moving funds out of Silk Road to their own wallets in 2012. None of Silk Road’s logs included their transactions, increasing suspicion that they were the work of a hacker.

The U.S. Treasury Department’s Internal Revenue Service later seized all the funds, worth $1 billion at the time

In 2021, prosecutors signed an agreement with Ulbricht that the money seized from the hacker would pay Ulbricht’s $183 million in restitution. This debt cancellation means that any funds Ulbricht earns while still in prison he can send to family and friends. Additionally, when he is released, he will not owe any money.

Investigators are upping their game

In the Silk Road investigation, authorities abandoned tried-and-tested methods. Instead of beginning with probable cause against an identified suspect and using a search warrant to get more evidence, they had first to obtain proof from the Silk Road site and track down suspects.

Since then, investigators have adopted state-of-the-art tracing tools for cryptocurrency crimes. 

While cryptocurrency transactions are public, investigators often need to look for links between the transactions and other internet activity to identify suspects. To do this, sometimes they go undercover on the dark web using accounts previously seized by authorities to mask their identities. Linking crypto transactions to individuals still requires a fair amount of technical expertise, though.

To help with this skills shortage, the Federal Bureau of Investigation launched the Virtual Asset Exploitation Unit to provide agents with tools and training to track fund flows on the blockchain.

“Even in cyberspace, the Department of Justice is able to use a tried and true investigative technique, following the money,” said Lisa Monaco, second-in-charge at the Justice Department, in Feb. 2022.

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All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

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Whale Watching: The Top 5 Crypto Transactions of the Week

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Whale Watching: The Top 5 Crypto Transactions of the Week

Bitcoin takes the throne for this week’s 127,351 BTC ($2,062,504,721) whale transfer out of Binance into an unknown wallet on Nov. 28, 2022, while an Ethereum whale transferred about 231,782 ETH ($274 million) on Nov. 28, 2022.

Binance reportedly paid $0.42 in transaction fees to move the large volume of Bitcoin in a bid as part of an audit process with the goal of greater transparency following the collapse of FTX. It assured users of the exchange that all their funds were safe.

Three Major Whale Transactions Done by Binance, Admits CZ

Additionally, the crypto exchange made at least two other whale transactions of around 200,000,000 BUSD, its native stablecoin, on Nov. 30, 2022. Binance was responsible for 81% of the roughly $3.2 billion of all whale transfers in the past week, with these two similar transfers tied for the fifth position.

Binance CEO Changpeng ‘CZ’ Zhao took to Twitter to allay fears of malpractice at the exchange, stating that a third-party auditor requires Binance to transfer a certain amount of crypto to itself to prove that the company owns the wallet. The remainder goes to another address, called a “Change Address.”

This is part of the Proof-of-Reserve Audit. The auditor require us to send a specific amount to ourselves to show we control the wallet. And the rest goes to a Change Address, which is a new address. In this case, the Input tx is big, and so is the Change. Ignore FUD! https://t.co/36wUPphIZk pic.twitter.com/2NkH5L5J9j

— CZ 🔶 Binance (@cz_binance) November 28, 2022

Other cryptos coming in close behind Binance’s Bitcoin transfer is the second-largest cryptocurrency by market capitalization, Ethereum, with almost $560 million transferred in two transactions of 231,736 ETH ($272 million) and 231,782 ETH ($274 million). Validators were later rewarded with $1.32 and $2.51 in transaction fees.

In both cases, the source and destination addresses were unknown. Crypto Twitter has speculated that the first transaction could have involved Ethereum co-founder Vitalik Buterin. Earlier this year, he reportedly dumped 3,000 ETH to DeFi protocol Uniswap V3 shortly after news broke of the failure of FTX.

Fueling the speculation was the fact that Buterin had moved 30,000 ETH out of his self-custodial wallet in May 2022, prompting speculation that Ethereum would dump later. However, it turned out that the transferred funds were set aside for charitable donations.

Whale Transaction Unlocks XRP From Escrow

Rounding up the top five is the transfer of 500,000,000 XRP ($204 million) from an escrow wallet to an unknown address on Dec. 1, 2022. The escrow is essentially a smart contract on the XRP Ledger, written to dispense locked tokens once certain external conditions are met.

In 2018, Ripple launched an initiative to release 1,000,000,000 XRP at the start of each month through an escrow to create a predictable supply of its native coin. 

Accordingly, the transfer of 500,000,000 XRP was followed by transfers of 400 million and 100 million coins to unlock 1,000,000,000 XRP for Dec. 2022. In the past, Ripple has kept 800,000,000 coins, choosing to lock up the remaining 200,000,000 XRP for a new release.

Summary of the Top 5 Whale Transactions

The top five transactions for the week were:

5. 200,000,000 BUSD ($200,080,000) was transferred from Binance to an unknown wallet on Nov. 30, 2022, followed by a transfer of the same amount of BUSD from an unknown wallet to Binance.

Tx costs: $3.31 and $1.27

4 – 500,000,000 XRP ($204,402,898) was unlocked from escrow at an unknown wallet on Dec. 1, 2022.

Tx cost: Not available

3 – 231,736 ETH ($271,829,771) was transferred from an unknown wallet to another unknown wallet on Nov. 28, 2022.

Tx cost: $1.32 

2 – 231,782 ETH ($274,046,462) was transferred from one unknown wallet to another on Nov. 28, 2022.

Tx cost: $2.51

1 – 127,351 BTC ($2,062,504,721) was transferred from Binance to an unknown wallet, likely another new Binance address, on Nov. 28, 2022.

Tx cost: $0.42

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here.

Disclaimer

All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

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Bybit announces second round of layoffs in 2022 to survive bear market

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Bybit announces second round of layoffs in 2022 to survive bear market

Ben Zhou, the co-founder and CEO of Bybit, announced a reorganization plan amid a prolonged bear market, which involves a steep reduction in the workforce.

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Bybit announces second round of layoffs in 2022 to survive bear market

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Yes, the bear market weeds out the bad actor, but it also forces the existing players to rethink their business strategies to offset resultant losses. In this effort, crypto exchange Bybit announced mass layoffs for the second time in 2022.

Ben Zhou, the co-founder and CEO of Bybit, announced a reorganization plan amid a prolonged bear market, which involves a steep reduction in the workforce. The “planned downsizing” will affects employees across the board:

“We are all saddened by the fact this reorganization will impact many of our dear Bybuddies and some of our oldest friends.”

Independent reporter Colin Wu highlighted that the layoff ratio is 30%. On June 20, Bybit silently laid off employees, citing unsustainable growth, which was confirmed via leaked internal documents. Bybit’s employee headcount grew from a few hundred to over 2000 in 2 years.

1) Difficult decision made today, but tough times demand tough decisions. I have just announced plans to reduce our workforce as part of an ongoing re-organisation of the business as we move to refocus our efforts for the deepening bear market.

— Ben Zhou (@benbybit) December 4, 2022

While announcing the incoming downsizing, Zhou shared his intent to make the offboarding process as smooth as possible. Sufficing this need for restructuring, Zhou said:

“It’s important to ensure Bybit has the right structure and resources in place to navigate the market slowdown and is nimble enough to seize the many opportunities ahead.”

For affected Bybit employees, the revelation is a hard pill to swallow, but Wu reported that employees would receive three months of salary as compensation.

Related: Bybit releases reserve wallet addresses amid calls for transparency

On Nov. 24, Bybit launched a $100 million support fund to provide liquidity to institutional traders following the FTX collapse.

The fund was made available to eligible market makers and high-frequency trading institutions and distributed at a 0% interest rate.

The maximum amount distributed per applicant was $10 million under the condition that the funds would be used for spot and Tether (USDT) perpetual trading on Bybit.

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Elon Musk alleges SBF donated over $1B to Democrats: “Where did it go?”

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Elon Musk alleges SBF donated over $1B to Democrats: “Where did it go?”

SBF made the “highest ROI trade of all time” by donating $40 million to the right people for getting away with stealing over $10 billion, said Will Manidis, the CEO of ScienceIO.

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Elon Musk alleges SBF donated over B to Democrats: "Where did it go?"

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The attempts of mainstream media to water down the frauds committed by FTX CEO Sam Bankman-Fried (SBF) did not fare well in convincing the crypto community and entrepreneurs. Instead, the misinformation campaign collided with Tesla CEO Elon Musk’s drive to position Twitter as “the most accurate source of information.”

The world is yet to overcome the shock after witnessing the legal leniency awarded to SBF for misappropriating users’ funds and shady investment practices via trading firms Alameda Research and FTX. Will Manidis, the CEO of ScienceIO, a healthcare data platform, pointed out that SBF made the “highest ROI trade of all time” by donating $40 million to the right people for getting away with stealing over $10 billion.

That’s just the publicly disclosed number. His actual support of Dem elections is probably over $1B. The money went somewhere, so where did it go?

— Elon Musk (@elonmusk) December 3, 2022

On the other hand, Musk alleged that SBF donated over $1 billion to Democratic candidates, which is way more than the publicly disclosed amount of $40 million. SBF previously admitted to making backdoor donations to the Democratic Party. Musk asked:

“His actual support of Dem elections is probably over $1B. The money went somewhere, so where did it go?”

The United States House Financial Services Committee chair Maxine Waters, a Democrat, and ranking member Patrick McHenry, a Republican, have requested SBF to appear in an investigative hearing scheduled for Dec. 13.

.@SBF_FTX, we appreciate that you’ve been candid in your discussions about what happened at #FTX. Your willingness to talk to the public will help the company’s customers, investors, and others. To that end, we would welcome your participation in our hearing on the 13th.

— Maxine Waters (@RepMaxineWaters) December 2, 2022

To this request, prominent entrepreneurs, including Polygon CEO Ryan Wyatt, informed Waters that “he’s (SBF) a criminal” after being shocked at the leniency shown by the people in power to the fugitive.

Related: FTX collapse drives curiosity around Sam Bankman-Fried, Google data shows

The crypto community openly criticizes paid narratives that try to show SBF in good light. The latest backlash is related to SBF’s interviews in New York Times DealBook Summit and Good Morning America interviews.

Speaking to the news outlets during the ‘apology tour,’ SBF portrayed himself as a victim and got applauded at the end. “Watching SBF’s interview is kind of like watching Casey Anthony’s documentary. They’re so mechanical, they’re so inauthentic in their delivery. If you feel any emotion, at all, it slows people down. The way it is expressed is a separate subjective matter,” said Twitter user and developer Naom.

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