50,000 Bitcoins Shocking Heist: Decoding Jimmy Zhong's Bizarre Arrest and Luxurious Life

Original Title: The secret life of Jimmy Zhong, who stole -- and lost -- more than $3 billion

Original Author: CNBC

Original Translation: BitpushNews

Athens, Georgia, is home to the University of Georgia, where the police are accustomed to common crimes in college towns, such as burglaries, bar fights, and various disturbances.

However, on the evening of March 13, 2019, local police received a rather unusual emergency call.

The caller was 28-year-old Jimmy Zhong, a local who frequently visited bars and a University of Georgia alumnus. Besides enjoying parties, he was also a computer expert with an advanced digital surveillance system installed in his home.

At that time, Zhong reported to the police that hundreds of thousands of dollars worth of cryptocurrency had been stolen from his home. The thought of the lost money pained Zhong deeply.

According to a recording obtained by CNBC, Zhong told the operator, "I’m having a panic attack."

Zhong declined the operator's suggestion to call an ambulance and began to explain, "I’m a Bitcoin investor. Bitcoin is a new thing online, internet-based."

No one could have anticipated that this call would lead to a nearly decade-long chase, revealing a major crime of the crypto era and resulting in the second-largest cryptocurrency seizure in the history of the Department of Justice in the United States (Note: At the time of the incident, this was the largest seizure of cryptocurrency in U.S. history, but this record was surpassed last February by the $4 billion in Bitcoin seized from the 2016 Bitfinex hack).

That night, Zhong's call led investigators down a hidden path to the early days of Bitcoin, unveiling a world where the lines between hero and villain blurred.

Everything would exceed Zhong's imagination.

Local police found no suspects while handling Zhong's theft case. Clearly lacking experience with cryptocurrency-related cases, the investigation progressed slowly.

Thus, Zhong decided to enlist the help of local private investigator Robin Martinelli, who operated her own investigation company in Loganville, Georgia.

Martinelli, a former police officer turned detective, was not an expert in cryptocurrency, but she had extensive experience dealing with infidelity and custody issues. Her company had even appeared on "The Montel Williams Show" (Note: a very popular American talk show focusing on social issues, which ended in 2008).

Despite undergoing an amputation surgery due to illness at the time, Martinelli was determined to help Zhong uncover the truth.

"When you wake up and find you can't stand on your feet, but you still have to manage a company, you have to get out there and show your skills," Martinelli told reporters in CNBC's new documentary "Crypto 911: Exposing a Bitcoin Billionaire."

She first reviewed the surveillance footage from Zhong's home. While examining the footage from the night of the incident, Martinelli spotted a slender male figure.

"We could see he was wearing a gray hat and a black ski mask," Martinelli said.

The suspect seemed familiar with Zhong's house, leading Martinelli to believe he might be a friend of Zhong's or at least someone who had heard about Zhong's Bitcoin holdings. Through the video, Martinelli was able to estimate the suspect's height and even the size of his hands.

Martinelli stated that she would monitor Zhong's friends, tracking them to their residences and the downtown bars on Broad Street and College Avenue. The detective installed a tracker on the vehicles of her targets, carefully reviewed their social media, and conducted background checks.

As she observed Zhong's friends at the bar, Martinelli seemed quite critical of that group. She described these so-called friends as "very casual, fake, and insincere, possibly a bit exploitative of Jimmy."

Martinelli noted that as her investigation gradually focused on Zhong's social circle, Zhong appeared resistant to her reasoning. Eventually, Martinelli identified a suspect whom she believed had stolen 150 Bitcoins from Jimmy. At the time, those Bitcoins were worth nearly $600,000.

However, when she presented her findings to Zhong, he was not interested in hearing them.

"Whenever I mentioned that someone in his circle knew where the money was, he would get very angry," Martinelli said. She understood that Zhong would feel hurt by the betrayal of those close to him.

"Jimmy wants to be loved," she said, "He wants friends."

Despite her disappointment in Zhong's friends, Martinelli grew increasingly fond of her client. She found Zhong to be a peculiar person who craved companionship.

"Jimmy is a good guy," she said.

Not just this private investigator, many locals also felt similarly about Zhong.

In the years leading up to the theft, Zhong had gained a reputation for being extravagant in town. He was the type of person who would pick up the tab for everyone at a bar, and spending hundreds of dollars on drinks was nothing to him.

According to court documents reviewed by CNBC, although Zhong lived in an unassuming small house off-campus, near student dorms and downtown bars, he frequently visited luxury hotels such as the Ritz-Carlton, the Plaza, and the Waldorf, and shopped at high-end stores like Louis Vuitton, Gucci, and Jimmy Choo. Luxury cars like Teslas were also his standard. Additionally, he purchased a second home in Gainesville, Georgia—a lakeside villa with a dock, not far from Athens. The residence was equipped with jet skis, small boats, a stripper pole, and plenty of alcohol.

His life was indeed "legendary."

Living a lavish lifestyle with seemingly no source of income, Zhong was known to those around him as not having a formal job. He told friends that he had been involved with Bitcoin for a long time, claiming to have mined thousands of Bitcoins when the cryptocurrency was just emerging. Zhong asserted that he had started engaging with cryptocurrency as early as 2009, the very year Bitcoin was created.

Regardless of what Zhong's profession was, one thing was certain: he had made a fortune and spent it lavishly.

In 2018, when his beloved Georgia Bulldogs football team made it to the Rose Bowl, Zhong gathered a small group of friends to "pilgrimage" to Los Angeles.

"Being with Jimmy, you feel like he can do anything," University of Georgia graduate Stefana Masic told CNBC. She was also part of that trip.

Masic said Zhong not only paid for everyone's tickets but also rented a private jet. He generously provided each friend with a $10,000 spending allowance for a shopping spree on Rodeo Drive in Beverly Hills. This group spent money on outfits, accessories, and jewelry for their time in the city.

"I had never been on a private jet or stayed in such a nice Airbnb before. It was cool because, you know, I experienced a lot of things I wouldn't normally get to."

While cheering for his team in Los Angeles, Zhong could not have known that a group of agents from the IRS Criminal Investigation Division, led by local officials, was diligently investigating a crime case from years prior.

According to court documents reviewed by CNBC, the investigation was sparked by a 2012 hacking incident in which 50,000 Bitcoins were stolen from a dark web site called "Silk Road" (Note: Silk Road was one of the earliest cryptocurrency markets where anonymous buyers and sellers traded various illegal items. The site was rife with drugs, weapons, pornography, and other illicit goods).

Court documents show that over the years, the value of the Bitcoins stolen from the Silk Road site had skyrocketed to over $3 billion. While investigators could track the movements of these Bitcoins on the public blockchain, they could not determine the true ownership of these funds. Therefore, they chose to bide their time, patiently waiting and observing how the hacker transferred funds between accounts and used so-called "mixers" to obscure the origins of the funds.

Eventually, a blockchain analysis company called Chainalysis tracking the digital wallet containing the stolen Silk Road assets discovered that the hacker had made a small mistake—he/she transferred approximately $800 worth of cryptocurrency to a cryptocurrency exchange. This exchange followed established banking rules, requiring account holders to provide real names and addresses to complete the necessary KYC (Know Your Customer) process.

The account was registered in Zhong's name. This transfer occurred in September 2019, six months after Zhong reported the theft to local police.

This alone was not enough to prove Zhong was the hacker; investigators needed more evidence.

Thus, the IRS contacted the Athens-Clarke County Police Department for assistance. At that time, the police investigation into Zhong had been stagnant.

"I received a call from an IRS agent," Lieutenant Jody Thompson, head of the local property and financial crimes unit, told CNBC, "and the agent asked if I could come over to talk about Jimmy. I thought, of course, I remember this case."

After that, Thompson teamed up with IRS Criminal Investigation agent Trevor McAleenan and another professional, Shaun MaGruder, to form a task force. Shaun MaGruder is the CEO of a cyber intelligence company called BlockTrace, which specializes in solving complex blockchain transaction issues and thus was able to work with the IRS.

The three investigators stated that they developed a plan. To get close to Zhong, they set a trap, telling him they were investigating the Bitcoin theft case he had reported earlier.

In reality, they were investigating the crimes Zhong was suspected of committing. The proceeds from these crimes were now worth billions of dollars.

According to exclusive law enforcement camera footage obtained by CNBC, when the three knocked on the door of Zhong's lakeside residence in Gainesville, Zhong warmly welcomed them. He thought they were there to help solve his cryptocurrency theft case.

"If you help me solve this case, I’ll take you guys out to party," Zhong said to the three in the law enforcement camera footage.

In the video, the agents were very polite to Zhong. They complimented his front door as "beautiful," said his sound system was "cool," and praised his dog, Chad. The agents also requested to tour Zhong's house. The footage shows the agents gently tapping the stone floor, checking the closets, and inspecting the wooden paneling. Zhong was unaware that they were searching for secret compartments in the house.

Zhong led the agents to his basement, which featured a full bar and a stripper pole.

"Is this what you use for exercise?" McAleenan asked Zhong.

"No, that's for the girls," Zhong replied.

The law enforcement camera footage also showed the agents carefully examining Zhong's security system and asking him to explain each function. In the video, Zhong even showed the agents a metal box, claiming he had used it to store $1 million in cash to impress a lady.

"Is that useful?" Lieutenant Thompson asked.

"No," Zhong said.

"That method will never work," Thompson replied.

Law enforcement learned that there were flamethrowers in Zhong's house. They also saw his AR-15 rifle hanging on the wall.

MaGruder stated that Zhong was a very savvy individual.

"He types on the keyboard faster than I've ever seen," MaGruder said, "He doesn't need to use a mouse because he knows all the shortcuts."

They took the opportunity to ask Zhong to open his laptop and explain how he obtained his Bitcoins. Zhong sat on the couch, with the agents beside him. As Zhong entered his password, he asked the others to turn away.

When Zhong opened the computer, the agents could see his Bitcoin wallet.

"Look, he has Bitcoin worth $60-70 million right next to us," MaGruder said in an interview with CNBC.

This evidence was enough for the agents to believe they had found the right place. As they left Zhong's lakeside residence, MaGruder told CNBC, he thought at the time, "This is unbelievable. I think we found our suspect."

MaGruder stated that the first contact with Zhong led the agents to obtain a federal search warrant for Zhong's residence. On November 9, 2021, McAleenan, MaGruder, and Thompson returned to Zhong's home with a large group of officers.

Before the officers searched the house, McAleenan had to explain to Zhong that he was not really there to help him; he was there to convict him.

"I told him, Jimmy, you know me, you know my name is 'Trevor.' But actually, I'm Trevor McAleenan, an agent with IRS Criminal Investigation. We are here to execute a federal search warrant on your house."

"His expression was like, 'Am I being played?'" McAleenan added.

At that moment, another officer inserted a device known as a "jiggler" into Zhong's laptop, causing the cursor on the screen to move continuously, allowing law enforcement to access the encrypted content on the computer.

Officers rushed into Zhong's home, rummaging through everything in search of evidence. McAleenan said they found a computer in an upstairs closet inside a popcorn tin. That computer contained Bitcoins worth millions of dollars.

McAleenan stated that the police used trained sniffing dogs to detect electronic devices and discovered a safe buried in concrete beneath the tiles in the basement. Court documents show that the safe contained precious metals, stacks of cash, and physical Bitcoins minted during the early days of cryptocurrency. Additionally, the police found a wallet containing Bitcoins stolen during the 2012 Silk Road hack.

Zhong was arrested.

McAleenan recalled, "It was already late at night, and we could finally say we were successful. We found key evidence. The house lit up. I mean, every agent on the scene was cheering."

In further investigations, the investigators learned more about this unique Mr. Zhong. In the crypto world, he was regarded as an "OG"—Original Gangster, referring to someone who entered the crypto space early and earned respect.

Investigators discovered that as early as 2009, the same year Bitcoin was created, Zhong was one of a small group of early developers dedicated to developing and refining this cryptocurrency technology. McAleenan stated that compared to some other OG players who later became famous in the Bitcoin community, his contributions were relatively minor. However, investigators ultimately concluded that Zhong did contribute to the original code of Bitcoin and provided advice on key issues such as how to scale the blockchain.

In other words, a programmer who once participated in Bitcoin development became one of the most impactful Bitcoin thieves in history.

McAleenan stated, "He is what we call a 'crypto OG,' a big player involved in the core development of Bitcoin. He has been deeply involved in this field for a long time."

Nathaniel Popper, author of "Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money," noted that Zhong's role in Bitcoin history is somewhat ironic, reflecting the culture that initially created cryptocurrency.

Popper told CNBC, "Everyone joined this field for their own reasons. Thus, a very diverse and quirky group has gathered here."

Popper said, "The history of Bitcoin's development is always full of irony. Indeed, a Bitcoin supporter stealing Bitcoin from another Bitcoin supporter is itself ironic. But I think, to some extent, this is also part of what defines Bitcoin."

Zhong was charged with wire fraud. After pleading guilty, he was sentenced to one year and one day in federal prison. The 33-year-old Zhong began serving his sentence in a federal prison in Montgomery, Alabama, on July 14, 2023.

Ultimately, Zhong did not retain the Bitcoins he had stolen. The U.S. government seized these assets. According to a document reviewed by CNBC, the U.S. government initiated procedures allowing "victims" to apply to recover their stolen Bitcoins.

But no one came forward to claim them. This is understandable, as the users of the Silk Road website in 2012 were primarily drug dealers and their clients. Consequently, the federal government sold the stolen Bitcoins and retained the proceeds. According to the IRS-CI, part of the revenue may be used to reward local police for their assistance in the case.

On April 14, after the court's ruling, CNBC attempted to interview Zhong as he left the courthouse, asking about his role in the case. Zhong covered his head with his coat and left without saying a word.

Before sentencing, Zhong told the judge that possessing billions of stolen Bitcoins made him feel important.

Zhong's lawyer, Michael Bachner, stated that the theft did not actually cause any harm to the U.S. government.

Bachner told CNBC, "Jimmy's actions did not cause any loss to the government. If Jimmy hadn't stolen those coins, the government would have seized them from Silk Road operator Ross Ulbricht. Then, two years later, in 2014, the government would have sold those seized Bitcoins like it did with other crypto assets."

Bachner added, "The market value of Bitcoin in 2014 was $320. So, if the government had sold those Bitcoins that year, they would have made $14 million. But now, because Jimmy took those Bitcoins, when the government sells them, they will make $3 billion in profit."

Worried about the life of his 13-year-old dog Chad, Zhong requested to be spared from imprisonment. Bachner said Zhong had experienced a very difficult life. He has autism and was severely bullied in school. Over the years, he found solace in an online community where he could utilize his computer skills.

As for the beginning of this story, the Bitcoin theft case that occurred in Athens in March 2019 remains unsolved. The criminals are still at large.

Zhong's beloved dog, Chad, now lives with one of his friends.