Road to Nowhere Leads to Somewhere With a Potential Billion Dollar Whistleblower Award – $3.36 Billion in Bitcoin Seized in Silk Road Fraud

November 14, 2022

On November 9, 2021, federal law enforcement officials seized approximately 50,000 Bitcoin, then valued at over $3.36 billion, that James Zhong had allegedly stolen from the dark web marketplace Silk Road, which, if reported by an anti-money laundering whistleblower (aml whistleblower) then it could trigger the largest whistleblower award in history. Despite Zhong’s alleged complex web of transactions to conceal his stolen funds, the government was able to track down the proceeds almost ten years after the Silk Road heist.

Anti-Money Laundering Whistleblower- Silk Road Bitcoin Fraud

Silk Road operated from 2011 to 2013, selling illegal goods and services ranging from drugs to assassinations. Its founder Ross Ulbright was sentenced to life in prison in 2015. However, by the time Silk Road shut down, Zhong had already allegedly absconded with about 50,000 Bitcoin stolen from Silk Road’s withdrawal processing system. He allegedly used multiple Silk Road accounts to trick its withdrawal system into releasing more funds than he had put in, allowing him to rapidly accumulate Bitcoin.

IRS agents recovered the stolen Bitcoin while executing a search warrant in Zhong’s Georgia house. The funds were discovered in an underground safe, and on a hidden computer. Zhong also surrendered additional Bitcoin as part of his plea bargain with the United States.

The government’s massive recovery demonstrates that, despite the privacy benefits of cryptocurrency, federal agents still possess the tools and expertise necessary to trace illicit funds. The United States has recently reinforced its ability to identify and prosecute money laundering, including by establishing a FINCEN task force under the Department of the Treasury. Under the Anti-Money Laundering Act of 2020, whistleblowers who assist the government in tracking down illicit transactions and their perpetrators can earn up to 30 percent of the final recovery. If there is an anti-money laundering whistleblower behind this seizure the anti-money laundering (aml) whistleblower could be entitled to over a billion dollars for doing the right thing the right way.  In recent years cryptocurrency is being used as a means to evade scrutiny and one of the concerns certain regulatory and legislative authorities have been the ability to track evanescent currency.  Although most cryptocurrency transactions are presumed to be legitimate the challenging trail makes it a perfect vehicle for money launderers.

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Money Laundering in cryptocurrency

Money laundering can take shape in many forms and is classically referred to as when individuals or entities use the banks for elicit purposes concealing the true nature of transactions.  For example, although certain states have allowed the sale of drugs like marijuana, the federal government still prohibits it and thus the banks are not supposed to be allowing transactions that facilitate any drug deals. Thus, marijuana companies may try to conceal the true origin of its business and may for parody’s sake have a company such as MJ sales, which the insiders know stands for marijuana, but they will tell the bank it is a comic bookstore dedicated to Mary Jane from Spiderman – so they can deceitfully use the bank.

In theory most of the Silk Road transactions that involved a bank all probably had some money laundering component since it was a platform to enable significant illegal conduct.  Just as Mr. Zhong was allegedly industrious enough to bleed billions from it, an astute whistleblower can potentially anonymously blow the whistle on a money laundering operation and receive a hefty percentage of the bounty without the culpability.

Whistleblowers seeking to expose money laundering and other types of fraud, such as Medicare Fraud or Pharmaceutical Fraud can contact the experienced whistleblower attorneys at Brown, LLC. Led by former FBI Special Agent Jason T. Brown, this team of whistleblower lawyers have navigated these sensitive and complex qui tam and whistleblower lawsuits to recover tens of millions in whistleblower awards for their clients and the taxpayers.