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The key lifetime of Jimmy Zhong, who stole – and misplaced – greater than $3 billion

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Athens, Georgia, is house to the College of Georgia, and the police there are used to school town-type crimes: break-ins, bar fights and various rowdiness. That form of factor.

However the 911 name that got here in on the evening of March 13, 2019, was not like something the Athens-Clarke County Police Division had ever encountered.

On the telephone was 28-year-old Jimmy Zhong, a neighborhood get together boy and Georgia alum who frequented Athens’ consuming institutions. He wasn’t like the opposite city rowdies – Zhong was additionally a pc skilled who had an unusually sturdy digital house surveillance system.

Now, he was calling to report against the law: a whole bunch of 1000’s of {dollars} in crypto foreign money that he stated had been stolen from his house. Considering of all that misplaced cash, Zhong was distressed.

In March 2019, somebody broke into Zhong’s house, shattering the window.

Supply: Athens-Clarke County Police

“I am having a panic assault,” Zhong informed the dispatcher, in line with a recording obtained by CNBC.

Zhong turned down the dispatcher’s provide of an ambulance, and commenced making an attempt to elucidate the state of affairs. “I am an investor in bitcoin, which is like a web-based factor,” he stated.

What occurred subsequent would deliver an finish to a virtually decade lengthy manhunt and remedy one of many largest crimes of the crypto period. And it additionally would result in the most important seizure of cryptocurrency from a person within the historical past of the Division of Justice.

Zhong’s emergency name that winter night despatched investigators down an extended digital path that led again to the earliest days of bitcoin and revealed a darkish reality concerning the universe of hackers and coders accountable for the creation of cryptocurrencies. It is a world the place heroes and villains traded locations and will even be the identical individuals.

None of it will go in any respect the best way Zhong needed.

The 911 name did not produce a suspect within the theft from Zhong’s home. Athens police have been coping with one in all their first crypto circumstances and unfamiliar with the shadowy underworld, and so they didn’t make progress within the case.

So Zhong turned to native non-public investigator Robin Martinelli, who owns and operates Martinelli Investigations in close by Loganville, Georgia.

Robin Martinelli, Martinelli Investigations proprietor and personal investigator.

CNBC

A former sheriff’s deputy turned PI, Martinelli was removed from an skilled in crypto. She specialised in course of serving, dishonest spouses and custody investigations, the kind of probes that when obtained her agency featured on an episode of “The Montel Williams Present.”

Martinelli had lately undergone surgical procedure to amputate one leg, leaving her to conduct her surveillance operations with the assistance of a prosthetic.

Nonetheless, she was motivated to unravel Zhong’s case.

“If you get up and do not put two ft on the bottom, however you continue to must run an organization, you bought to get on the market and kick ass,” Martinelli informed CNBC in an interview for the brand new documentary, “Crypto 911: Exposing a Bitcoin Billionaire.”

She started by analyzing Zhong’s sturdy surveillance video archive of his house. In footage from the evening of the crime, Martinelli noticed a slender male determine.

Surveillance footage CNBC obtained captures somebody breaking into Zhong’s house in March 2019.

Supply: Athens-Clarke County Police  

“We may inform that that they had like a hood on – a grey hood – however then that they had nearly like a black ski masks,” Martinelli stated.

The suspect appeared to know his method round Zhong’s home, which led Martinelli to imagine that he was a pal or at the least somebody who had heard Zhong boast about his bitcoin stash. From the video, Martinelli was in a position to decide the suspect’s peak and even the dimensions of his palms.

She stated she started her investigation by placing Zhong’s pals below surveillance, following them to their houses and downtown bars on Broad Avenue and Faculty Avenue. She put trackers on vehicles and scoured social media and carried out background checks.

As she watched Zhong’s bar pals come and go, Martinelli shaped a low opinion of the group. She described them as “very, very informal, plastic, probably not caring, possibly utilizing Jimmy just a little bit.”

Martinelli stated Zhong appeared proof against her theories, particularly once they started to deal with his circle of pals. Martinelli finally settled on one suspect specifically who she believed had stolen 150 bitcoins from Jimmy. On the time, that quantity of the digital foreign money was price almost $600,000.

Zhong did not wish to hear it, she stated.

“He would get upset once I would form of point out any person would needed to have identified the place this money was,” Martinelli stated. And she or he understood why Zhong was so harm by the concept that somebody near him may have betrayed him.

“Jimmy needed to be cherished,” she stated. “Jimmy needed pals.”

Whilst Martinelli soured on the pal group, she was warming as much as her consumer, who she perceived as an odd man in quest of pals.

“Jimmy was a great man,” she stated. 

Lots of people round Athens felt equally about him.

Within the years earlier than the theft, Zhong was identified for throwing some huge cash round city. He was the form of man who would purchase a spherical of costly pictures for the entire bar, a whole bunch of {dollars} vanishing in seconds down keen throats.

Zhong pictured with two girls in entrance of a limousine.

Supply: Zhong’s social media profile

Though he lived in a modest off-campus bungalow, close to pupil housing and the downtown school bar scene, he stayed at fancy lodges, together with the Ritz Carlton, the Plaza and the Waldorf Astoria, in line with courtroom paperwork CNBC reviewed. He shopped at high-end shops akin to Louis Vuitton, Gucci and Jimmy Choo. He drove fancy vehicles, together with a Tesla. He purchased a second house, a lake home with a dock in Gainesville, Georgia, a brief drive from Athens. He stocked it with jet skis, boats, a stripper pole, and plenty and plenty of liquor.

Zhong pictured with two girls on a yacht.

Supply: Zhong’s social media profile

His events have been epic.

Zhong was residing his greatest life with no seen supply of earnings. So far as anybody knew, he did not actually have a job. He informed his pals that he’d gotten into bitcoin early, mining 1000’s of cash within the earliest days of the expertise. Zhong informed individuals he dabbled in crypto way back to 2009, the 12 months bitcoin was invented by the mysterious Satoshi Nakamoto and a small crew of builders tied on-line to the nameless crypto creator.

No matter Zhong was doing, he was making mountains of money. And he was prepared to splurge.

In 2018, when his beloved Georgia Bulldogs soccer staff made the Rose Bowl, Zhong rounded up a small group of pals for a pilgrimage to Los Angeles. 

Zhong pictured with a bunch of pals on the 2018 Rose Bowl sport.

Supply: Zhong’s social media profile

“It actually felt like with Jimmy, there have been no limits,” Stefana Masic, a Georgia alum and one of many pals on the journey, informed CNBC. 

Stefana Masic, Zhong’s pal.

CNBC

Masic stated not solely did Zhong pay for all of the tickets, however he additionally rented a non-public jet for the cross-country flight. And he gave every pal as much as $10,000 for a Beverly Hills purchasing spree on Rodeo Drive. They spent it on outfits, equipment and baubles to put on within the metropolis.

“I had by no means flown non-public earlier than, and I by no means stayed in such a pleasant Airbnb. It was cool as a result of, you recognize, I obtained to expertise plenty of issues that I usually would not.”

As he was cheering on his staff in LA, Zhong could not have identified {that a} small group of brokers from the IRS Felony Investigation unit, led by officers in the identical metropolis, have been painstakingly making an attempt to unravel against the law that dated again years. 

What had captured the investigators’ consideration was a 2012 hack through which somebody had stolen 50,000 bitcoins from a website on the darkish net known as Silk Highway, in line with courtroom paperwork CNBC reviewed. That website was one of many earliest crypto marketplaces, the place nameless consumers and sellers exchanged all method of illicit materials. It was full of medication, weapons, pornography and different stuff individuals needed to maintain secret.

Over time, the worth of the bitcoin stolen by the Silk Highway hacker had soared to greater than $3 billion, in line with courtroom paperwork. Investigators may monitor the situation of the foreign money on the blockchain, which is a public ledger of all transactions. However they could not see the identification of the brand new proprietor of the funds. So that they watched and waited for years because the hacker transferred funds from account to account, peeled some away, and pushed a few of it via crypto “mixers” designed to obscure the supply of the cash.

Lastly, Chainalysis, a blockchain analytics firm that was tracing the digital wallets containing the stolen Silk Highway property, noticed the hacker made a tiny mistake. He transferred round $800 price to a crypto change that adopted established banking guidelines, together with so-called know your buyer processes, requiring actual names and addresses of account holders.

The account was registered in Zhong’s title. The transaction came about in September 2019, six months after Zhong’s 911 name to the native police.

That alone wasn’t sufficient to show Zhong was the hacker. That they had to make sure.

So the IRS known as the Athens-Clarke County Police Division and requested for some assist, in line with sources at each businesses. On the time, the police investigation into Zhong’s personal crime report had been languishing.

“I obtained a name from an IRS agent,” Lt. Jody Thompson, who leads the native property and monetary crimes unit, informed CNBC.  “And he stated, ‘can I come by and converse to you about Jimmy?’ And I used to be like, positive, I bear in mind this case.”

Lt. Jody Thompson, Athens-Clarke County Police.

CNBC

After that, Thompson joined forces with IRS-CI particular agent Trevor McAleenan and Shaun MaGruder, CEO of a cyber intelligence firm known as BlockTrace. MaGruder’s firm works with the IRS as an embedded contractor and was employed for its expertise untangling sophisticated blockchain transactions. 

Shaun MaGruder, BlockTrace CEO.

CNBC

Collectively, the three investigators stated they devised a plan. They might strategy Zhong utilizing a ruse, telling him they have been investigating the crime that he’d known as about, the one through which a thief had stolen a whole bunch of 1000’s of {dollars} of his bitcoin.

In actuality, they have been investigating Zhong for against the law they believed he had dedicated. Against the law whose proceeds have been now price billions of {dollars}. 

When the three males knocked on the door of his lake house in Gainesville, Zhong opened it enthusiastically, in line with physique digicam footage CNBC completely obtained. He believed the police officer and the 2 specialists have been there to assist remedy his crypto chilly case.

“Should you guys remedy this for me, I’ll invite you out for a celebration,” Zhong informed the trio on the physique digicam footage.

The video reveals the officers pouring on the reward. They known as his entrance door “lovely.” They known as his audio system “loopy,” and so they complimented his canine, Chad. They requested for a tour of the home. Physique digicam footage reveals the lads tapping on stone flooring, wanting in closets and testing wooden paneling. Zhong did not realize it, however they have been scouring for secret compartments. 

Zhong introduced investigators to his basement, outfitted with a full bar and a stripper pole.

“Is that this your exercise?” McAleenan requested Zhong.

“Nope, that is for women,” Zhong replied.

Physique digicam footage CNBC obtained reveals investigators in Zhong’s basement, which comprises a full bar and a stripper pole.

Supply: Athens-Clarke County Police

The physique digicam footage additionally reveals they obtained a great take a look at Zhong’s safety system, asking him to elucidate every of its options and capabilities. Zhong can also be captured displaying them a steel case he stated he as soon as used to retailer $1 million in money so he may impress a lady.

“Did it work?” requested Lt. Thompson.

“Nope,” Zhong stated.

“It by no means does,” Thompson replied.

The legislation enforcement officers discovered that Zhong had a flamethrower on the premises. And so they noticed his AR-15 rifle hanging on the wall.

MaGruder stated Zhong’s degree of sophistication was obvious.

“He was navigating that keyboard like I’ve by no means seen somebody navigate a keyboard,” MaGruder stated. “He did not have to make use of a mouse as a result of he knew all of the hotkeys.”

Taking part in on the ruse, the officers requested Zhong to open his laptop computer and clarify how he got here to have the bitcoin within the first place. Zhong sat on the sofa subsequent to the investigators and entered his password, asking them to show away as he typed.

When he opened the laptop computer, legislation enforcement may see his bitcoin pockets.

“Lo and behold, he had $60 or $70 million price of bitcoins proper there subsequent to us,” MaGruder informed CNBC in an interview. 

Physique digicam footage CNBC obtained captures Zhong displaying investigators tens of millions of {dollars} of bitcoin on his laptop computer.

Supply: Athens-Clarke County Police

The proof was sufficient to persuade the investigators they have been heading in the right direction. As he exited Zhong’s lake home, MaGruder informed CNBC he thought to himself, “That is unimaginable. I feel we discovered our man.”

The primary go to allowed the investigators to acquire a federal search warrant for Zhong’s house, McAleenan stated. McAleenan, MaGruder, and Thompson returned with an infinite staff of officers on Nov. 9, 2021.

Earlier than the officers raided the home, McAleenan needed to clarify to Zhong that he wasn’t actually making an attempt to assist him. He was making an attempt to convict him.

“I stated, Jimmy, you recognize me as ‘Trevor.’ I am really Trevor McAleenan. I am a particular agent with IRS Felony Investigation, and we’re right here to execute a federal-approved warrant on your own home,” McAleenan stated.

Trevor McAleenan, IRS-CI Particular Agent.

CNBC

“And he form of had this seem like, ‘Am I being punked?'” McAleenan added.

At that second, one other officer slid a tool often known as a “jiggler” into Zhong’s laptop computer, inflicting the cursor to repeatedly transfer and giving legislation enforcement entry to the password-protected contents of the pc, McAleenan stated.

Officers flooded into the house, cracking open each crevice in quest of proof. McAleenan stated in an upstairs closet, they discovered a popcorn tin with a pc hidden inside that held tens of millions of {dollars} price of bitcoin.

The popcorn tin the place investigators discovered a single board pc hidden inside that held tens of millions of {dollars} price of bitcoin.

Supply: IRS Felony Investigations

The one board pc investigators discovered contained in the popcorn tin.

Supply: IRS Felony Investigations

Utilizing sniffer canines skilled to detect electronics, McAleenan stated they discovered a secure buried in concrete below some basement flooring tile. Courtroom paperwork stated the secure contained valuable metals, stacks of money and bodily bitcoins minted within the early years of crypto. Additionally they discovered a pockets with bitcoin from the unique hack of Silk Highway in 2012.

Bodily bitcoin and money investigators discovered through the search warrant.

Supply: IRS Felony Investigations

Zhong was busted.

“Actually late at evening we have been in a position to say we have been profitable,” McAleenan stated. “We discovered the proof that we have been in search of. And the home lit up. I imply, each agent on the positioning cheered.”

As they sorted via the proof, brokers found one thing else concerning the uncommon Mr. Zhong. He was, in crypto slang, an “authentic gangster,” or OG.

Investigators found that way back to 2009, the 12 months bitcoin was invented, Zhong was amongst a small group of early coders who labored to develop and excellent the expertise. He was a smaller contributor than a few of the different OG gamers who’ve since grow to be well-known within the bitcoin group, McAleenan stated. However investigators concluded that he made contributions to the unique bitcoin code and provided concepts to the early builders on key matters like how one can cut back blockchain measurement.

In different phrases, a hacker who had been concerned within the growth of bitcoin itself went on to grow to be one of many largest bitcoin thieves of all time.

“He is likely one of the, as we dubbed it, the unique gangsters, OGs, so far as bitcoin core software program builders,” McAleenan stated. “He had been on this house for fairly some time.”

The irony of Zhong’s function within the historical past of bitcoin is emblematic of the tradition that constructed the cryptocurrency within the first place, stated Nathaniel Popper, creator of “Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Attempting to Reinvent Cash.”

Nathaniel Popper, creator of “Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Attempting to Reinvent Cash.”

CNBC

“All people got here to this for their very own purpose,” Popper informed CNBC. “And it was, on account of that, a really kind of eclectic and eccentric group of individuals.”

“Bitcoin was all the time shot via with irony,” Popper stated. “Sure, there was one thing ironic a few bitcoin proponent stealing bitcoin from one other bitcoin proponent. However I feel that was additionally in some methods part of what outlined bitcoin.” 

Zhong was charged with wire fraud. After pleading responsible, he was sentenced to at least one 12 months and a day in federal jail. Zhong, now 33 years outdated, started his sentence on the federal jail camp in Montgomery, Alabama, on July 14, 2023.

Ultimately, Zhong did not get to maintain the stolen bitcoin. The U.S. authorities seized these property. Officers opened a course of that allowed victims of the hack to use to get their bitcoin again, in line with a forfeiture doc CNBC reviewed.

No one got here ahead to assert the loot. That is not stunning, on condition that customers of Silk Highway in 2012 have been largely drug sellers and their clients. The federal authorities merely offered off the stolen bitcoin and can maintain the proceeds. Among the income generated will possible be shared with the Athens-Clarke County Police Division, in recognition of the native officers’ assist in the case, in line with the IRS-CI.

As he left the courthouse after his sentencing on April 14, CNBC tried to query Zhong about his function within the crime. Zhong coated his head along with his coat and left with out saying a phrase. 

In his assertion to the decide earlier than sentencing, Zhong stated having billions in stolen bitcoin made him really feel necessary. 

Zhong along with his attorneys, Michael Bachner and John Garland, at sentencing.

Supply: IRS Felony Investigations

Zhong’s legal professional, Michael Bachner, says the theft by no means really broken the U.S. authorities.

Michael Bachner, Zhong’s legal professional.

CNBC

“The federal government has definitely not been harm by Jimmy’s conduct in any way,” Bachner informed CNBC. “If Jimmy had not stolen the cash and the federal government had in actual fact seized them from [Silk Road operator Ross Ulbricht] they’d have offered them two years later in 2014 as they did with different cash.”

At that time, the federal government “would have gotten $320 a coin or made someplace about $14 million,” Bachner stated. “Now, on account of Jimmy having them, the federal government has gotten a $3 billion revenue.”

Zhong requested for no jail time as a result of he was involved concerning the destiny of Chad, his 13-year-old canine. Zhong has had a troublesome life. On the autism spectrum, Bachner stated he was severely bullied at college. And he discovered solace through the years in a web-based group the place he may deploy his computing abilities. 

Chad, Zhong’s aged canine.

Supply: Zhong’s social media profile

As for the unique crime in opposition to Jimmy Zhong — the bitcoin theft in Athens that led him to the 911 name in March 2019 — that crime has by no means been solved. The perpetrator stays at giant.

Zhong’s canine, Chad, is staying with a pal.

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