The secret life of Jimmy Zhong, who took– and lost– more than $3b

Athens, Georgia, is home to the University of Georgia, and the authorities there are utilized to college town-type criminal offenses: burglaries, bar battles and various rowdiness. That example.

But the 911 call that can be found in on the night of March 13, 2019, differed from anything the Athens-Clarke County Police Department had actually ever experienced.

On the phone was 28- year-old Jimmy Zhong, a regional celebration young boy and Georgia alum who often visited Athens’ drinking facilities. He wasn’t like the other town rowdies– Zhong was likewise a computer system professional who had an abnormally robust digital home monitoring system.

Now, he was contacting us to report a criminal offense: numerous countless dollars in crypto currency that he stated had actually been taken from his home. Thinking of all that lost cash, Zhong was distressed.

“I’m having a panic attack,” Zhong informed the dispatcher, according to a recording gotten by CNBC.

Zhong denied the dispatcher’s deal of an ambulance, and started attempting to discuss the scenario. “I’m a financier in bitcoin, which resembles an online thing,” he stated.

What took place next would bring an end to an almost years long manhunt and fix among the greatest criminal offenses of the crypto period. And it likewise would cause the biggest seizure of cryptocurrency from a private in the history of the Department of Justice.

Zhong’s emergency situation call that winter season night sent out detectives down a long digital path that led back to the earliest days of bitcoin and exposed a dark fact about deep space of hackers and coders accountable for the development of cryptocurrencies. It’s a world where heroes and bad guys traded locations and might even be the very same individuals.

None of it would address all the method Zhong desired.

The 911 call didn’t produce a suspect in the theft from Zhong’s home. Athens authorities were handling among their very first crypto cases and not familiar with the shadowy underworld, and they stopped working to make development in the event.

So Zhong turned to regional private detective Robin Martinelli, who owns and runs Martinelli Investigations in close-by Loganville, Georgia.

A previous constable’s deputy turned PI, Martinelli was far from a professional in crypto. She concentrated on procedure serving, cheating partners and custody examinations, the kind of probes that when got her company included on an episode of “The Montel Williams Show.”

Martinelli had actually just recently gone through surgical treatment to cut off one leg, leaving her to perform her monitoring operations with the assistance of a prosthetic.

Still, she was inspired to fix Zhong’s case.

“When you wake up and don’t put two feet on the ground, but you still have to run a company, you got to get out there 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 robust monitoring video archive of his home. In taking a look at video from the night of the criminal offense, Martinelli identified a slim male figure.

“We could tell that they had like a hood on – a gray hood – but then they had almost like a black ski mask,” Martinelli stated.

The suspect appeared to understand his method around Zhong’s home, which led Martinelli to think that he was a pal or a minimum of somebody who had actually heard Zhong boast about his bitcoin stash. From the video, Martinelli had the ability to identify the suspect’s height and even the size of his hands.

She stated she started her examination by putting Zhong’s good friends under monitoring, following them to their homes and downtown bars on Broad Street and CollegeAvenue She put trackers on cars and trucks and searched social networks and performed background checks.

As she viewed Zhong’s bar good friends reoccur, Martinelli formed a low viewpoint of the group. She explained them as “very, very casual, plastic, not really caring, maybe using Jimmy a little bit.”

Martinelli stated Zhong appeared resistant to her theories, particularly when they started to concentrate on his circle of good friends. Martinelli ultimately picked one suspect in specific who she thought had actually taken 150 bitcoins fromJimmy At the time, that quantity of the digital currency deserved almost $600,000

Zhong didn’t wish to hear it, she stated.

“He would get upset when I would kind of mention somebody would had to have known where this cash was,” Martinelli stated. And she comprehended why Zhong was so harmed by the concept that somebody near him might have betrayed him.

“Jimmy wanted to be loved,” she stated. “Jimmy wanted friends.”

Even as Martinelli soured on the pal group, she was heating up to her customer, who she viewed as an odd male looking for good friends.

“Jimmy was a good guy,” she stated.

A great deal of individuals around Athens felt likewise about him.

In the years before the theft, Zhong was understood for tossing a great deal of cash around town. He was the type of guy who would purchase a round of pricey shots for the entire bar, numerous dollars disappearing in seconds down excited throats.

Although he resided in a modest off-campus cottage, near trainee real estate and the downtown college bar scene, he remained at expensive hotels, consisting of the Ritz Carlton, the Plaza and the Waldorf Astoria, according to court files CNBC evaluated. He patronized high-end shops such as Louis Vuitton, Gucci and JimmyChoo He drove expensive cars and trucks, consisting of a Tesla He purchased a 2nd home, a lake home with a dock in Gainesville, Georgia, a brief drive fromAthens He equipped it with jet skis, boats, a stripper pole, and lots and great deals of alcohol.

His celebrations were impressive.

Zhong was living his finest life without any noticeable income. As far as anybody understood, he didn’t truly work. He informed his good friends that he ‘d entered bitcoin early, mining countless coins in the earliest days of the innovation. Zhong informed individuals he meddled crypto as far back as 2009, the year bitcoin was developed by the strange Satoshi Nakamoto and a little team of designers connected online to the confidential crypto developer.

Whatever Zhong was doing, he was making mountains of money. And he wanted to spend lavishly.

In 2018, when his precious Georgia Bulldogs football group made the Rose Bowl, Zhong assembled a little group of good friends for a trip to LosAngeles

“It really felt like with Jimmy, there were no limits,” Stefana Masic, a Georgia alum and among the good friends on the journey, informed CNBC.

Masic stated not just did Zhong spend for all the tickets, however he likewise leased a personal jet for the cross-country flight. And he provided each pal as much as $10,000 for a Beverly Hills shopping spree on RodeoDrive They invested it on clothing, devices and baubles to use in the city.

” I had actually never ever flown personal previously, and I never ever remained in such a great Airbnb It was cool because, you understand, I got to experience a great deal of things that I generally would not.”

As he was cheering on his group in LA, Zhong could not have actually understood that a little group of representatives from the internal revenue service Criminal Investigation system, led by authorities in the very same city, were meticulously attempting to fix a criminal offense that went back years.

What had actually recorded the detectives’ attention was a 2012 hack in which somebody had actually taken 50,000 bitcoins from a website on the dark web called Silk Road, according to court files CNBC evaluated. That website was among the earliest crypto markets, where confidential purchasers and sellers exchanged all way of illegal product. It had plenty of drugs, weapons, porn and other things individuals wished to conceal.

Over the years, the worth of the bitcoin taken by the Silk Road hacker had actually skyrocketed to more than $3 billion, according to court files. Investigators might track the place of the currency on the blockchain, which is a public journal of all deals. But they could not see the identity of the brand-new owner of the funds. So they viewed and waited on years as the hacker moved funds from account to account, peeled some away, and pressed a few of it through crypto “mixers” created to obscure the source of the cash.

Finally, Chainalysis, a blockchain analytics business that was tracing the digital wallets including the taken Silk Road possessions, saw the hacker made a small error. He moved around $800 worth to a crypto exchange that followed recognized banking guidelines, consisting of so-called understand your consumer procedures, needing genuine names and addresses of account holders.

The account was signed up in Zhong’s name. The deal happened in September 2019, 6 months after Zhong’s 911 call to the regional authorities.

That alone wasn’t enough to show Zhong was the hacker. They needed to make sure.

So the internal revenue service called the Athens-Clarke County Police Department and requested some assistance, according to sources at both companies. At the time, the authorities examination into Zhong’s own criminal offense report had actually been suffering.

“I got a call from an IRS agent,”Lt Jody Thompson, who leads the regional residential or commercial property and monetary criminal offenses system, informed CNBC. “And he said, ‘can I come by and speak to you about Jimmy?’ And I was like, sure, I remember this case.”

After that, Thompson signed up with forces with IRS-CI unique representative Trevor McAleenan and Shaun MaGruder, CEO of a cyber intelligence business called BlockTrace. MaGruder’s business deals with the internal revenue service as an ingrained specialist and was worked with for its experience untangling complex blockchain deals.

Together, the 3 detectives stated they created a strategy. They would approach Zhong utilizing a ploy, informing him they were examining the criminal offense that he ‘d called about, the one in which a burglar had actually taken numerous countless dollars of his bitcoin.

In truth, they were examining Zhong for a criminal offense they thought he had actually devoted. A criminal offense whose earnings were now worth billions of dollars.

When the 3 guys knocked on the door of his lake home in Gainesville, Zhong opened it enthusiastically, according to body electronic camera video CNBC specifically acquired. He thought the law enforcement officer and the 2 experts existed to assist fix his crypto cold case.

“If you guys solve this for me, I will invite you out for a party,” Zhong informed the trio on the body electronic camera video.

The video reveals the officers soaking the appreciation. They called his front door “beautiful.” They called his speakers “crazy,” and they matched his canine,Chad They requested a trip of your home. Body electronic camera video reveals the guys tapping on stone floorings, searching in closets and taking a look at wood paneling. Zhong didn’t understand it, however they were searching for secret compartments.

Zhong brought detectives to his basement, geared up with a complete bar and a stripper pole.

“Is this your workout?” McAleenan asked Zhong.

“Nope, that’s for girls,” Zhong responded.

The body electronic camera video likewise reveals they got an excellent take a look at Zhong’s security system, asking him to discuss each of its functions and abilities. Zhong is likewise recorded revealing them a metal case he stated he when utilized to save $1 million in money so he might impress a female.

“Did it work?” askedLt Thompson.

“Nope,” Zhong stated.

“It never does,” Thompson responded.

The police officers found out that Zhong had a weapon on the properties. And they saw his AR-15 rifle hanging on the wall.

MaGruder stated Zhong’s level of elegance appeared.

“He was navigating that keyboard like I’ve never seen someone navigate a keyboard,” MaGruder stated. “He didn’t have to use a mouse because he knew all the hotkeys.”

Playing on the ploy, the officers asked Zhong to open his laptop computer and discuss how he came to have the bitcoin in the very first location. Zhong rested on the sofa beside the detectives and entered his password, inquiring to turn away as he typed.

When he opened the laptop computer, police might see his bitcoin wallet.

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

The proof sufficed to encourage the detectives they were on the ideal track. As he left Zhong’s lake home, MaGruder informed CNBC he believed to himself, “This is incredible. I think we found our guy.”

The very first see permitted the detectives to get a federal search warrant for Zhong’s home, McAleenan stated. McAleenan, MaGruder, and Thompson returned with a massive group of officers onNov 9, 2021.

Before the officers robbed your home, McAleenan needed to discuss to Zhong that he wasn’t truly attempting to assist him. He was attempting to convict him.

“I said, Jimmy, you know me as ‘Trevor.’ I’m actually Trevor McAleenan. I’m a special agent with IRS Criminal Investigation, and we’re here to execute a federal-approved warrant on your house,” McAleenan stated.

“And he kind of had this look like, ‘Am I being punked?'” McAleenan included.

At that minute, another officer moved a gadget referred to as a “jiggler” into Zhong’s laptop computer, triggering the cursor to constantly move and offering police access to the password-protected contents of the computer system, McAleenan stated.

Officers flooded into the home, splitting open every crevice looking for proof. McAleenan stated in an upstairs closet, they discovered a popcorn tin with a computer system concealed inside that held countless dollars worth of bitcoin.

Using sniffer canines trained to discover electronic devices, McAleenan stated they discovered a safe buried in concrete under some basement flooring tile. Court files stated the safe consisted of rare-earth elements, stacks of money and physical bitcoins minted in the early years of crypto. They likewise discovered a wallet with bitcoin from the initial hack of Silk Road in 2012.

Zhong was busted.

“Really late at night we were able to say we were successful,” McAleenan stated. “We found the evidence that we were looking for. And the house lit up. I mean, every agent on the site cheered.”

As they arranged through the proof, representatives found something else about the uncommonMr Zhong. He was, in crypto slang, an “original gangster,” or OG.

Investigators found that as far back as 2009, the year bitcoin was developed, Zhong was amongst a little group of early coders who worked to establish and best the innovation. He was a smaller sized factor than a few of the other OG gamers who have actually given that ended up being popular in the bitcoin neighborhood, McAleenan stated. But detectives concluded that he made contributions to the initial bitcoin code and provided concepts to the early designers on crucial subjects like how to decrease blockchain size.

In other words, a hacker who had actually been associated with the advancement of bitcoin itself went on to turn into one of the greatest bitcoin burglars of perpetuity.

“He is one of the, as we dubbed it, the original gangsters, OGs, as far as bitcoin core software developers,” McAleenan stated. “He had been in this space for quite a while.”

The paradox of Zhong’s function in the history of bitcoin is emblematic of the culture that constructed the cryptocurrency in the very first location, stated Nathaniel Popper, author of “Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money.”

“Everybody came to this for their own reason,” Popper informed CNBC. “And it was, as a result of that, a very sort of eclectic and eccentric group of people.”

“Bitcoin was always shot through with irony,” Popper stated. “Yes, there was something ironic about a bitcoin proponent stealing bitcoin from another bitcoin proponent. But I think that was also in some ways a part of what defined bitcoin.”

Zhong was charged with wire scams. After pleading guilty, he was sentenced to one year and a day in federal jail. Zhong, now 33 years of ages, started his sentence at the federal jail camp in Montgomery, Alabama, on July 14, 2023.

In completion, Zhong didn’t get to keep the taken bitcoin. The U.S. federal government took those possessions. Officials opened a procedure that permitted victims of the hack to use to get their bitcoin back, according to a loss file CNBC evaluated.

Nobody stepped forward to declare the loot. That’s not unexpected, considered that users of Silk Road in 2012 were mainly drug dealerships and their clients. The federal government merely sold the taken bitcoin and will keep the earnings. Some of the earnings produced will likely be shown the Athens-Clarke County Police Department, in acknowledgment of the regional officers’ assistance in the event, according to the IRS-CI.

As he left the court house after his sentencing on April 14, CNBC tried to concern Zhong about his function in the criminal offense. Zhong covered his head with his coat and left without stating a word.

In his declaration to the judge before sentencing, Zhong stated having actually billions in taken bitcoin made him feel crucial.

Zhong’s lawyer, Michael Bachner, states the theft never ever in fact harmed the U.S. federal government.

“The government has certainly not been hurt by Jimmy’s conduct whatsoever,” Bachner informed CNBC. “If Jimmy had actually not taken the coins and the federal government had in truth took them from [Silk Road operator Ross Ulbricht] they would have offered them 2 years later on in 2014 as they finished with other coins.”

At that point, the federal government “would have gotten $320 a coin or made somewhere about $14 million,” Bachner stated. “Now, as a result of Jimmy having them, the government has gotten a $3 billion profit.”

Zhong requested no prison time since he was worried about the fate of Chad, his 13- year-old canine. Zhong has actually had a hard life. On the autism spectrum, Bachner stated he was seriously bullied at school. And he discovered solace throughout the years in an online neighborhood where he might release his computing abilities.

As for the initial criminal offense versus Jimmy Zhong– the bitcoin theft in Athens that led him to the 911 contact March 2019– that criminal offense has actually never ever been resolved. The wrongdoer stays at big.

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