$3.36B in Bitcoin Hidden in Bathroom

The Department of Justice has found $3.36 billion of stolen money in a popcorn tin. But more than $2 billion of it no longer exists.

It's not a case of corrupt law enforcement, but rather a spectacular example of the bizarre world of cryptocurrency. It raises head scratching questions about what money really is in 2022.

The money was seized in a raid of the home of James Zhong. He's now admitted to stealing it in a hacking attack on the controversial online marketplace Silk Road. That's a site where goods and services, many of them illegal, were bought and sold using cryptocurrency.

Bogus Transactions Created Big Balance

To try to keep the explanation short, cryptocurrencies are based on a blockchain. That's a digital ledger (record of transactions) that exists as copies on websites rather than in a single location. In theory that makes it extremely difficult and practically impossible to falsify.

Blockchain transactions need to be verified by user's computers. Cryptocurrencies such as Bitcoin incentivise users to do this by effectively running a competition where the first to verify a batch of transactions wins a unit (or a fraction of a unit) of the cryptocurrency. Once completed, it can be exchanged for real world cash.

Zhong's "heist" involved taking advantage of a flaw in the way Silk Road recorded payments between users. He created nine user accounts and made 140 transactions between them in a short period. That confused the system enough that he was able to withdraw around 50,000 bitcoin. (Source: cnbc.com)

Bathroom Closet Housed Billions

Although Silk Road closed years ago, with its founder sentenced to life in prison, officials did not stop looking for the stolen Bitcoin. To be specific, they were looking for computer hard drives or storage devices that physically housed the unique code behind Zhong's Bitcoin "wallet".

They raided his home in Georgia last year but have now only revealed the case is complete. The drives and devices were split between an under floor safe and a popcorn tin hidden in a bathroom closet. (Source: justice.gov)

Zhong faces a maximum sentence of 20 years. He's also forfeited the Bitcoin to the US government, which will likely be auctioned.

The delay in completing the case will have cost the government dearly. At the time of the raid, the Bitcoin was worth $3.3 billion. Today it's equivalent to "just" $1.1 billion.

What's Your Opinion?

Should law enforcement pursue cryptocurrency theft in the same way as other stolen money? Does a potential billion dollars for the government make this a smart operation to have run? Are you amused by the irony of a digital heist ending with the money hidden in a cupboard?