In a historic turn of events, the US Department of Justice (DOJ) announced on Monday, 7th of November, that it had seized over 50,000 Bitcoin, allegedly stolen from the dark-web marketplace Silk Road in 2012, during a raid on 32-year-old James Zhong’s home in 2021. It’s the second-largest financial seizure by American federal law enforcement to date, according to public records.
Authorities found devices stashed in an underground floor safe and a “single-board computer” hidden in a popcorn tin in Mr Zhong’s bathroom, said to contain the $3.36 billion in now seized Bitcoin.
IRS-CI Special Agent in Charge Tyler Hatcher said Zhong attempted to hide his stolen Bitcoin through “a series of complex transactions which he hoped would be enhanced as he hid behind the mystery of the ‘darknet.’” Mr Zhong now faces a 20-year prison sentence for wire fraud, as “he executed a scheme to defraud Silk Road for its money and property.”
US Attorney Damian Williams said in response to the seizure: “Thanks to state-of-the-art cryptocurrency tracing and good old-fashioned police work, law enforcement located and recovered this impressive cache of crime proceeds. This case shows that we won’t stop following the money, no matter how expertly hidden, even to a circuit board in the bottom of a popcorn tin.”
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Crypto Market Turmoil
News of the historic seizure came just days before FTX, the world’s second-largest cryptocurrency exchange, announced that it was on the brink of financial collapse, seeking help from the world’s largest exchange, Binance. But adding more fuel to the market fire, Binance has now walked away from its non-binding bail-out agreement to save the troubled exchange, saying FTX “is beyond our ability to help.”
Sam Bankman-Fried (SBF), FTX founder and CEO, has lost 94% of his net worth as a result of the news, representing the largest one-day wealth collapse of any billionaire in history. The turmoil and negative news (FUD) swirling around the cryptocurrency market has hit Bitcoin hard, with BTC falling below 15.8k USD for the first time during this current bear-market downturn.
It’s safe to assume that crypto investor confidence has been shaken to its core this week; it’s unclear when, or even how, it will make a comeback. But what’s even more concerning is the impact this will have on regulators’ stance on the cryptocurrency industry.
“FTX going down is not good for anyone in the industry,” Binance CEO Changpeng Zhao said in a statement. Adding, “regulators will scrutinize exchanges even more. Licenses around the globe will be harder to get.”
— CZ 🔶 Binance (@cz_binance) November 9, 2022
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This latest debacle has led U.S. regulators to begin investigating FTX’s handling of customers’ funds — and rightly so. “US regulators are investigating whether beleaguered crypto-exchange FTX.com mishandled customer funds, and they’re looking into the firm’s relationships with other parts of Sam Bankman-Fried’s crypto empire,” Bloomberg reports.
Furthermore, in an embarrassing turn of events, SBF deleted tweets made moments before announcing FTX’s potential insolvency:
Luna & Celsius 2.0
Unfortunately for FTX users, their funds are locked, similar to what we saw earlier this year when crypto lender Celsius prevented withdrawals immediately before filing for bankruptcy protection. This is something crypto investors have had to deal with from day one. The lesson? NEVER keep your money or crypto on exchanges! With industry titans dropping like flies, always remember to keep your stash safe.
We recommend using a secure hard-storage wallet like the Ledger Nano X — the most secure wallet for storing your crypto. Please note: this is an affiliate link. If you purchase something, we’ll make a small percentage. All funds go towards supporting independent news!