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He Stole $3.4 BILLION - But Made One Mistake — Transcript

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0:00- [Narrator] On a crisp November morning in 2021,
0:02IRS criminal investigators
0:04surrounded this million dollar lake house nestle
0:07in the quaint town of Gainesville, Georgia.
0:09During the raid,
0:10they find carefully submerged under blankets
0:13in a bathroom closet this Cheetos popcorn tin.
0:16Inside, a single board computer
0:18containing $3.4 billion in Bitcoin.
0:21Jimmy Zhong had acquired the coins a decade prior,
0:25but the person he took them from had thanked him,
0:28even sent more coins as a reward.
0:30There was no calls for justice,
0:32so why were they raiding his house all this time later?
0:35After years of living the high life,
0:38mostly spending his millions trying to impress women,
0:41Jimmy had made one single mistake
0:43leading Uncle Sam directly to his fortune.
0:46This is the story of Jimmy Zhong
0:48and how he should have got away.
0:52Jimmy was never the cool kid in school.
0:54As an Asian,
0:55growing up in Cobb County, Georgia throughout the '90s,
0:58he was a little out of place.
1:00Kids bullied and brutalized him, quote,
1:02"for being fat, ugly, and weird."
1:04He said the worst experience happened
1:06when he was pantsed in front of everybody
1:08at a football game.
1:09He felt humiliated, didn't even feel like a person.
1:12And worse, his parents weren't there for him either.
1:15Two first generation immigrants from China,
1:18they were trying to make ends meet in a foreign land.
1:20His mom got a job as an overnight nurse
1:22and according to Jimmy, she was never awake.
1:25His father never found a job.
1:27He'd pick up anything cheap and try to resell it for a buck,
1:30and when he wasn't doing that,
1:31he would huddle away in the basement.
1:33Then come middle school,
1:34his parents got divorced and cemented this dysfunction.
1:37For a young kid struggling,
1:39not having a supportive family didn't help.
1:42Jimmy craved social acceptance.
1:44He had no friends.
1:46But in the midst of this turmoil,
1:48there was one place where Jimmy always felt safe.
1:51Alone, upstairs in his room,
1:53the computer with its endless possibilities
1:55provided an escape.
1:57So Jimmy would boot that old thing up every single day.
1:59And by middle school,
2:00he had taught himself a slew of programming languages.
2:03To quote Jimmy,
2:04"The computer allowed me to fantasize
2:06"about making up the perfect life or something."
2:09And well little did Jimmy know back then,
2:11but soon this digital escape would make him
2:13one of the world's richest people for basically no work.
2:18You know, it was easiest for Jimmy in class
2:20to be the quiet, smart kid.
2:22Whenever his peers would tease or taunt him,
2:24he could just bury his nose in a book
2:26or a math problem to ignore them.
2:28Top of that, he was just damn smart.
2:30So in 2008, he graduated from Central Gwinnett School
2:34with a near perfect SAT score,
2:36earning himself the prestigious HOPE Scholarship.
2:38He was going to the University of Georgia
2:40to study computer science
2:42and he thought this would finally impress his parents,
2:45but they didn't even care.
2:46So at 18 years old,
2:47he packed up his bags and moved an hour away
2:50never to speak with them again.
2:52Once on campus, it was a new beginning.
2:54Jimmy said, this is when, quote, "life really started."
2:58And there's one thing you should know about Jimmy.
3:00He loves alcohol, but he had a problem.
3:03He didn't have a lot of money.
3:05That didn't matter though,
3:06because during his first year,
3:07shortly after Christmas break early 2009,
3:10an opportunity presented itself.
3:12While browsing a programming form,
3:14he saw a post about a new form of digital currency
3:17called Bitcoin.
3:18And Jimmy, with his knack for programming
3:20and keen sense for innovation
3:22was one of the earliest adopters,
3:23started mining coins on his laptop,
3:26would earn a couple hundred a day,
3:28but at the time Bitcoins were beyond worthless.
3:31Some guy had managed to sell 5,000 of them for five bucks,
3:34but that wouldn't even pay for a case of beer.
3:36So Jimmy turned off his miner and forgot about them
3:39till 2011 because whoa, all of a sudden
3:42they're worth $30 a coin.
3:43And of course Jimmy hears about that and wow,
3:45where did he store all those Bitcoins
3:47he mined two years ago?
3:48He can't find them.
3:49He lost them,
3:50has no idea where he saved them on that laptop.
3:53Cue the start of a desperate attempt to earn some more.
3:56Now 21 years old,
3:57he creates an account on Bitcoin Talk,
3:59his username referencing a Mercedes-Benz 300 SD,
4:03the car he always dreamed of having,
4:05thought it might impress the ladies.
4:07Curiously, Jimbo's first post was about mixing Bitcoin.
4:11See, it turns out,
4:12since every Bitcoin transaction is public information
4:16on the blockchain,
4:17it's not as anonymous as originally thought.
4:19And mixing is a technique of tumbling Bitcoin around
4:22many transactions to make the digital trail harder to follow
4:25for any would-be sleuths.
4:27And for some reason Jimmy was conscious of this.
4:30This post is important,
4:31but we'll come back to it because for now
4:34he was making a little money.
4:35Sounded like a fairly sophisticated mining operation
4:38for the time and well, Jimmy was a degenerate.
4:41He got into gambling.
4:42He was a huge fan of this website called Bitcoin Ponzi,
4:45but it closed down.
4:47and Jim-Jim being a talented programmer at this point,
4:503 years into a six year computer science degree,
4:53decided to start his own version of the game.
4:55Between this website,
4:57which took a fee from users playing on it
4:59and him getting back into mining,
5:00he likely made a significant amount of coins.
5:03But better yet, he managed to recover many of the coins
5:06he mined in 2009.
5:08Though apparently, 5,000 of them to this day
5:11remain lost forever due to a hard drive failure.
5:14Maybe if someone talented in data recovery
5:16gets their hands on that thing,
5:18they'll have themselves a little windfall.
5:20Nevertheless, Bitcoins were worth about $5 at this time,
5:23and it seems he had more disposable income
5:26than he ever did before.
5:27So what's he do?
5:28He uses it to party.
5:30According to Jimmy,
5:31he started drinking every weekend,
5:33had numerous blackouts and also liked to do a little...
5:37(imitates sniffing)
5:39In fact, this was the start of Jimmy
5:40getting into that booger sugar every weekend
5:43for a six year period.
5:44And that's partly because his drug habit
5:46was about to make him a billion dollars
5:49in a way that he never expected.
5:52While Jimmy was busy living out his rockstar fantasies
5:56on the weekend,
5:57a new website hosted on the dark net
5:59was growing in popularity, the infamous Silk Road.
6:02- [Reporter] They were listed in the in the light of day.
6:05It's unbelievable.
6:06- [Narrator] Any drug you wanted you could get
6:08and you had to pay with Bitcoin.
6:10Being terminally online,
6:11Jimster hears about the Silk Road's reputation
6:14and begins using the site for personal amounts.
6:17Remember his earlier post about mixing,
6:19maybe he wanted to better hide what he was doing here.
6:22However, after only a couple of transactions,
6:24according to Jimmy,
6:25he decided to withdraw his remaining Bitcoins from the site.
6:28I guess his local stuff was better,
6:30and in the process
6:31he accidentally double-clicked the withdrawal button.
6:34To a surprise, both withdrawals go through,
6:37he just got double the coins.
6:39Jimmy had just accidentally stumbled upon
6:42a massive coding flaw that no one knew about
6:45for over a year.
6:47This is a race condition attack
6:49and Jimmy's got fast fingers,
6:51wanted to stretch them out,
6:52see just how many withdrawals he can make.
6:55So he got to work.
6:56On September 19th, 2012, 22 years old,
6:59he creates a new account on the Silk Road
7:01called The Tormentor, deposited 500 Bitcoins,
7:05then spammed that mouse button,
7:07makes five withdrawals in the same second,
7:09resulting in net gain of 2,000 coins.
7:12Later that day,
7:13he does it again, makes himself another thousand coins.
7:163,000 coins in total then worth $30,000,
7:20Jimmy's over the moon.
7:22That's tuition.
7:23But this wasn't an infinite money glitch.
7:25I mean the Bitcoins were coming from somewhere.
7:28See, silk Road implemented a tumbling service
7:30that was meant to keep their users anonymous
7:32when making payments.
7:33Whenever you made a deposit of Bitcoins onto the site,
7:36it was combined with a bunch of other user deposits
7:38then mixed around a little bit.
7:40This was meant to make it harder for any law enforcement
7:43to follow the money back to any one individual.
7:45Nevertheless, Jimmy wanted to know exactly how many Bitcoins
7:49he could get from Silk Road,
7:50so he turned into the exact sort of Bitcoin sleuth
7:53Silk Road system was attempting to prevent
7:55in the first place.
7:56And amazingly, he posted about it on Bitcoin Talk.
8:00Someone had made a threat about at the time,
8:02the largest Bitcoin address in existence
8:04holding just shy of 500,000 coins,
8:07at the time worth about $5 million
8:09and they want to know who owned the damn thing.
8:12Now, a lot of people were speculating Silk Road,
8:14but Jimmy knew.
8:16Check it out.
8:16He writes, "I've been studying the mixer lately,
8:19"it does absolutely nothing to hide the fact
8:20"that you're using Silk Road."
8:22Links his findings on a blockchain explorer and says,
8:25"It looks like they're moving about 50,000 Bitcoins
8:28"in and out every day or two."
8:30Jimmy knew if he sat watching the blockchain,
8:32as soon as they put those coins in the withdrawal pool,
8:35he could take them all.
8:36He made this post on the 21st and by the 24th
8:39using a total of nine accounts making over 140 transactions,
8:44Jimmy did exactly that.
8:46At the time, these coins were worth $620,000,
8:50but this wouldn't go unnoticed.
8:52The Silk Road made money off commissions of sales.
8:55In total it made 614,000 coins,
8:58but Jimmy had just snagged one-12th of that.
9:00So just a few days after taking them,
9:03the owner, Dread Pirate Roberts sends him a message
9:06on one of the accounts, but it's not what you might think.
9:10He didn't demand or try to threaten Jimmy
9:12into sending the coins back.
9:14He simply asked how the exploit was done
9:16and when Jimmy told him,
9:17apparently Pirate even sent more coins as a thank you.
9:20So Jim Jam 22 with a drinking, gambling and drug problem
9:24now had nearly a million bucks, so he blows it, right?
9:29Jimmy puts 40,000 coins into one wallet
9:32and 10,000 into another
9:34then does absolutely nothing with them.
9:37It's hard to imagine what was going through his head
9:39at this time, but he's showing a lot of responsibility.
9:42That said, poor socially repressed, Jimmy
9:44had to brag about this money a little bit, right?
9:47So in November, 2012, two months after he got the coins,
9:51he creates a new account on Bitcoin Talk
9:53using the handle Loaded.
9:55And not only would this be his outlet to show off,
9:57but also perhaps his first mistake.
10:00On his profile, he writes,
10:01"Bitcoin multimillionaire, broker, and asset manager"
10:05as a sign message using his 40,000 coin address.
10:08The sign message is proof he owned the funds.
10:11And all he does is ship posts
10:13larping as some big time Bitcoin asset manager.
10:15Check this out.
10:16In one post he writes
10:17that he has a large new client incoming
10:19and he's now managing 200,000 coins in total.
10:22In another he's bragging
10:24that he's responsible for recent crashes in the market
10:27because he's selling so much of his client funds.
10:30And even saying more ridiculous stuff
10:32like he flies to China by private planes with cash
10:36so he can buy Bitcoin for a cheaper price
10:38in over-the-table transactions for his clients.
10:41I mean, come on,
10:42this guy says he had them put a normal toilet
10:44in a five-star Chinese hotel,
10:46so he is not pooping into the floor ones
10:47that are so common over there because quote,
10:49"last time he made a mess."
10:51It's like Jimmy was either starting
10:53a fake wealth manager arc to solicit more funds
10:56and start a Ponzi scheme or he was just a troll.
10:59I think he got some sort of gratification outta this lying.
11:02He liked to play the big shot,
11:04wanted people to see him as successful.
11:06He had never omit publicly to the true origins of the coins,
11:09but this wasn't an attempt to cover that up either.
11:12The smart thing to do
11:13would've been to remain quiet altogether.
11:15And by late 2013,
11:17that was becoming more true than ever.
11:22Late October, 2013, Silk Road is taken down by the FBI.
11:26They seized 170,000 Bitcoin
11:28from Silk Road's founder Ross Ulbricht,
11:31a far cry from the 614,000 they knew he profited
11:35and they wanted the rest.
11:36Ross is on record saying the vast majority of these proceeds
11:39were reinvested back into the marketplace,
11:42but there's always been suspicions
11:44about the true whereabouts of the coins.
11:46Worse, during the bust,
11:47the Feds got a copy of Silk Road's database,
11:49which recorded all user activity,
11:52deposits, withdrawals, you name it.
11:54Within that database was clear evidence of Jimmy's scheme
11:57and if they knew to look at it,
11:59well, they could easily trace the blockchain
12:01to see the wallets where Jimmy now kept his stash.
12:03And if he sent any to an exchange to sell for USD,
12:07well, they could subpoena the exchange
12:09and get Jimmy's identity.
12:11All of a sudden the stolen funds were a whole lot hotter
12:13and Jimmy was gonna have to be very smart
12:15with what he did with them to avoid being caught.
12:20Come 2014, Jimmy graduates with his bachelor degree.
12:23Out of college and Bitcoin going
12:25for just over $500 per coin,
12:27he's now worth 30 million bucks
12:29and will never have to work again
12:30if he plays his cards right.
12:32So bored, he starts warming up to the highlight,
12:35gets that Mercedes-Benz he always dreamed of
12:37and buys a modest home in Athens, Georgia.
12:39You can see his car parked in the driveway,
12:41Georgia Bulldog signage on the house,
12:43which was his university sports team
12:45and he was a big fan of them,
12:46but most of all Jimmy wanted to use his money to impress.
12:50He's taking trips to Miami,
12:51paying for all his friends to come
12:53and even giving them free Bitcoins as gifts.
12:56Besides a brief stint installing alarm systems
12:58during the summer of 2009, he never worked.
13:01This was entirely funded by liquidating Bitcoins.
13:04As Bitcoins went up in price,
13:06he even lamented on Bitcoin Talk
13:08that he shouldn't have bought his house in full,
13:10cost him over 1,000 coins at the time
13:12and now would've only been around 300.
13:15He even regretted how many he sold at $5 for beer money.
13:19This didn't stop him from drinking though.
13:21As the years went on
13:22and Jimmy fell deeper into his life of chasing pleasure,
13:26his post on Bitcoin Talk slowed down.
13:28Often only returning the post that he was drunk
13:31or doing something a little harder.
13:33Sometimes he would even make these drunk posts on Loaded
13:36and then go talk to himself on his Mercedes-Benz account.
13:39It was all very strange, but check out this post.
13:42This guy is joking that the price of Bitcoin dropped
13:46recently because Loaded was arrested.
13:48He jokes back, "If I ever get that sloppy,
13:51"lock me up and throw the keys away."
13:53If only the person who posted this
13:56knew the truth of how close they were.
13:59And I'm not talking about the time in 2016
14:02when Jimmy got arrested in Eddie's Calzones
14:04after an off-duty cop witnessed him dip a small spoon
14:07on a key chain into a bag of white powder.
14:09True story by the way.
14:11He got a year of probation
14:12and the charges were later expunged.
14:14I mean, like, you think selling Bitcoin
14:17to buy a house in cash might have raised some red flags
14:19with the IRS, but no,
14:21Jimmy always paid his tax on sold coins.
14:25He indeed wasn't getting sloppy.
14:27Top of that, all this was funded entirely
14:30by his legally obtained coins.
14:32Five years on since the hacking,
14:34he hadn't touched any of it.
14:35Kind of amazing.
14:36Jimmy had held 50,000 coins
14:39through every major bear and bull market.
14:41He had watched as one day they were worth
14:43tens of millions of dollars only to drop
14:45and lose millions the next.
14:47Through it all, he never sold.
14:49He had just posted pictures of balls
14:51and say the only thing that kept him through
14:53watching these crazy highs and lows is drugs.
14:56This was all about to change though, because come 2017,
15:00Jimmy would make a post on Loaded
15:02that would make him famous on Bitcoin Talk
15:04and get him a little more attention than he bargained for.
15:10Bitcoin gained a ton of popularity throughout 2016,
15:13ending the year just shy of a thousand dollars,
15:16but this was causing problems.
15:18Bitcoin's protocol can only process
15:20a handful of transactions per second,
15:22and already they were slowing down considerably
15:25under the mounting usage.
15:26If Bitcoin was the ever go mainstream,
15:28it would need to handle thousands of transactions
15:30every second with cheap fees.
15:33By 2017, the Bitcoin community was deeply divided
15:36over how to address the scalability problem.
15:39This led to the idea of Bitcoin Cash,
15:41which would be capable of facilitating more transactions,
15:44but despite having Bitcoin in the name,
15:46it would be an entirely new coin.
15:49To try and ease the transition
15:50for every Bitcoin someone already owned,
15:53they would get the equivalent amount in Bitcoin Cash.
15:55Jimmy was not going to not only have his 50,000 Bitcoin,
15:59but also now another 50,000 in this new currency.
16:02The thing is not everyone believed it would be a success.
16:06There was two distinct camps.
16:07Those who continued to support Bitcoin
16:09and believe this new essentially altcoin
16:12would never gain traction.
16:13And then there was those who believe Bitcoin
16:15was destined to fail because of its scalability problems
16:18and Bitcoin Cash would be its natural successor.
16:21Jimmy was the former.
16:24So on March 21st, 2017,
16:26five months before Bitcoin Cash was set to release,
16:29Jimmy made his most notable post on Loaded.
16:32He tags Roger Ver.
16:34This guy's an early adopter and investor
16:36into many Bitcoin companies and now a big supporter
16:39of the move to Bitcoin Cash.
16:42And Jim Jam basically told Roger
16:44to put his money where his mouth was,
16:46proposed a one-to-one trade,
16:48Roger's Bitcoin for his Bitcoin Cash.
16:52At the time,
16:53this is a $60 million speculative deal being proposed.
16:56People are captivated by it and Jimmy is kind of a hero.
17:00This is the Bitcoin forum after all,
17:02there's not a lot of supporters of cash on here.
17:04People are really roasting Roger
17:06saying he needs to agree to this trade,
17:09otherwise it's calling his bluff,
17:11would mean he doesn't actually believe in Bitcoin Cash.
17:14The news of this trade even makes it Reddit.
17:16Nobody thought he would accept.
17:18To everyone's surprise, he seems to,
17:20but he wants 48 hours before arranging the deal.
17:23Two days later, Jimmy makes a comment on the thread
17:26saying he has yet to see a contract,
17:28but this was the last post he would ever make.
17:30Roger over the next few months
17:32would going to make numerous posts
17:34saying that he's tried to contact Loaded
17:35but received radio silence back.
17:38And so the deal never happened.
17:41Jimmy had disappeared.
17:43He even stopped posting on his Mercedes-Benz account.
17:46Now look, maybe Roger's confidence
17:48just scared Jimmy into backing down.
17:50He thought, "Oh wow, maybe Bitcoin Cash
17:52"will actually be a success
17:54"and I shouldn't go through with this deal."
17:56Or maybe it's because somebody on Reddit
17:59traced his coins back to Silk Road.
18:01Check it out.
18:02It turns out after taking the coins from Silk Road,
18:05Jimmy had run them through a mixer.
18:07The problem with trying to tumble
18:09such a huge amount of coins
18:11is that no one on a mixing service
18:13is doing that at the same time,
18:14and so it becomes trivial to follow the trail.
18:17You can just watch where the huge lump of coins
18:19get bounced around from
18:20and you know they all belong to the same user.
18:22Worse in this case, the final destination,
18:25that 40,000 Bitcoin address,
18:27Jimmy had signed on his Loaded profile.
18:30They knew that these coins belonged to him
18:32and they very clearly traced back to the Silk Road.
18:35And what a shame for Jimmy that this deal never happened
18:38because two months later, August 1st, 2017,
18:41the hard fork of Bitcoin Cash happens
18:43and it's not nearly as successful as Bitcoin.
18:46Despite Bitcoin's challenges,
18:48it goes on its biggest bull run yet,
18:50peaking at $20,000 a coin,
18:52while Bitcoin Cash was worth around $3,500 at that time.
18:56By not taking this deal with Roger,
18:59Jimmy had now made a $973 million mistake.
19:03In fact, Jimmy, just days after the fork occurred,
19:06deposited his Bitcoin Cash into an overseas exchange,
19:10selling them for money
19:11and then buying an additional 3,500 Bitcoin.
19:14These coins were only worth an extra $68 million
19:18at the peak in 2017.
19:19A far cry from the additional billion he could have had.
19:22But I mean, Jimmy now had 53,500 coins to his name,
19:26which at the current prices
19:27were worth well over a billion dollars anyways,
19:30so what's another billion?
19:31Best of all, Jimmy felt comfortable
19:33spending those 3,500 coins he essentially got for free,
19:37and so he embarks on a $16 million spree.
19:45If anyone tells you crime doesn't pay,
19:46I just want you to remember this big smile on Jimmy's face.
19:50He's 28 and more than anything
19:52wanted to buy social acceptance.
19:54Guy got himself multiple Lamborghinis,
19:57a boat, a few jet skis, a motorcycle,
19:59spent hundreds of thousands chartering yachts,
20:02private jets, hosting friends at five-star hotels,
20:04going to nightclubs, sporting events,
20:06you name it, and everything's on Jimmy's dime.
20:09He's even giving out Bitcoins again.
20:11This time five USBs loaded with 50 coins,
20:14each one worth about a million bucks.
20:16It was pretty lucrative being Jimmy's friend.
20:18At one point, this mad lad even got $700,000 in cash
20:22to quote, "have a case full of money like in the movies."
20:25He hoped this would impress a woman
20:27into having sexual relations with him.
20:29He'd later say that this plan did not work.
20:32In fact, he had never slept with anyone
20:34except one time when he paid for it.
20:37Poor fella.
20:37This was all to the astonishment of Clayton Kemker.
20:40Not the sex stuff, the money you perverts.
20:43Clayton was interested in developing some real estate,
20:46had become good friends with Jimmy and together in 2019,
20:49they teamed up to create a company.
20:51Jimmy was to fund the project,
20:53putting $9.5 million down and pledged $32 million more
20:57to secure a $60 million loan.
20:59In case you're wondering,
21:00Clayton thought that Jimmy
21:01was just some sort of like, computer genius,
21:04got in real early on Bitcoin.
21:05Which is true,
21:06he did get in really early,
21:07but it's not exactly the full story.
21:09Anyways, all of this showboating was again,
21:12getting him a little more attention than he bargained for.
21:17So that briefcase full of cash Jimmy had,
21:19turns out someone had their eye on it.
21:22Late March, 2019,
21:24still living in his modest ruth street home,
21:26Jimmy reports to the police
21:28that his place was broken into while he was outta town.
21:31Told them he came home
21:32and found his rear bedroom window shattered.
21:34The thief had taken that briefcase
21:36and Jimmy had spent almost half of it,
21:38so they contained about $400,000 in cash
21:41and a thumb drive with personal information.
21:45Yeah, there was probably a million bucks in Bitcoin on that,
21:47but he didn't tell police that.
21:49Said to the officer that he felt the person
21:51who stole all of this probably knew him
21:53because he had hidden the briefcase behind an air vent.
21:57Yeah, police Lieutenant Shaun Barrett said,
22:00the cash was never recovered,
22:01nor was the suspect identified.
22:03But because of the amount of money reported stolen,
22:06it quote, "raised flags with the IRS."
22:08Jimmy, Jimmy, Jimmy.
22:10Cue Trevor McAleenan, a criminal investigator at the IRS
22:14focusing on cyber crime, digital assets
22:17and decentralized finance.
22:19This guy's entire job is linking cryptocurrency
22:22with its quasi anonymous properties
22:24to the people spending it.
22:25These guys are basically FBI agents
22:28and you don't want to be investigated by them.
22:30The thing is, these guys work in secrecy,
22:32sometimes for years,
22:33slowly building evidence to ensure a strong conviction.
22:36So Jimmy is none the wiser
22:38that everything he is doing is now being scrutinized.
22:42But also the IRS has no idea that Jimmy
22:44was involved in the Silk Road heist.
22:46They're simply looking into the origin of his funds
22:48to see if they're gotten from ill-gotten gains,
22:51because it's such a strange occurrence.
22:53And they're probably not really looking to hard,
22:55and Jimmy's been extremely careful
22:57with never linking his Silk Road funds
22:59to his real identity, right?
23:01It probably didn't help
23:02almost immediately after the robbery,
23:04no longer feeling safe in his house,
23:06he purchased a million dollar lakeside home
23:08about an hour away in Gainesville.
23:10But that was just a bonus now
23:12if the IRS could bust him with something.
23:14The first thing they do is request
23:16from Jimmy's internet service provider,
23:18a history of web activity and IP addresses assigned to him.
23:21They find from August 1st, 2016
23:24until at least April 1st, 2021,
23:26he was assigned this one.
23:28This is like your online phone number.
23:30Everyone has a unique one,
23:31and when you do anything online like visit a website,
23:34they see it, can trace you back to it.
23:36Whereas his ISP log showed his internet history.
23:39He had been visiting an undisclosed crypto exchange
23:42to liquidate Bitcoin.
23:43So the IRS sends Jimmy's IP to the exchange
23:47and they get back all of the details.
23:49Turns out he registered an account in March, 2017
23:52and likewise, that exchange gave up full records
23:55of everything Jimmy ever sold and purchased on there.
23:57This was gonna be a problem.
23:59I'm surprised Jimmy hadn't been using
24:01a virtual private network.
24:03His ISP wouldn't have been able to see
24:05what websites he was visiting
24:06and the exchange wouldn't even know
24:08what his real IP address is.
24:09For example, had he used NordVPN,
24:12the sponsor of this video,
24:13Jimmy could have connected to any one
24:15of their hundreds of servers
24:17and made it look like he's from any anywhere in the world.
24:19Now, I'm not sure how Nord
24:21would like me relating their product back to crime.
24:23I mean, they probably would turn Jimmy into the FBI
24:25if they came knocking,
24:26but they could have used it
24:27for a bunch of other legal stuff too.
24:29I'll give you one example.
24:31Since your ISP sees everything you do online,
24:33they'll commonly throttle the download speed
24:35of resource-intensive stuff like movies, Netflix,
24:38heck even like downloading something from OneDrive,
24:41switch on Nord,
24:42and all of a sudden your traffic is encrypted,
24:44your ISP has no idea what you're doing,
24:46so they can't throttle it.
24:48I mean, they're trying to save bandwidth
24:49for other customers,
24:50but it's your darn money and time on the line.
24:53My ISP hates Steam in particular,
24:55so I stick it to them every chance I get
24:57by booting up Nord and having my downloads go at full tilt.
25:01Jimmy could have used it to save some money
25:03when traveling too.
25:04Sometimes companies want to charge you a certain price
25:06depending where they think you're from,
25:08especially car rentals and hotels.
25:10No problem.
25:11Connect to a different country and boom,
25:13you're saving money.
25:14You can't put a price on privacy,
25:16but Nord does, and it's surprisingly cheap.
25:18I promise you, you don't have to be Jimmy to afford it.
25:21Right now you can go to NordVPN.com/Crumb
25:24or use my link in the description
25:26to take advantage of a huge discount with the purchase
25:28of a two year plan plus an extra month free.
25:30Then worst case, Ontario, you want to end up like Jimmy,
25:33they've got a 30 day money back guarantee,
25:35so it's completely risk free.
25:37Thank you, NordVPN.
25:39So knowing the details of every time Jimmy sold Bitcoins
25:42for USD, including the addresses involved,
25:45the IRS starts combing through his transactions.
25:48They love the blockchain.
25:50Think about it.
25:51It's a public ledger of every transaction
25:52that has ever taken place.
25:54They would love this sort of thing
25:55in their traditional investigations.
25:57The only problem is linking the real identities
26:00behind these addresses.
26:02But that has been largely solved
26:03by Bitcoin tracing companies.
26:05For example, in the case of Silk Road,
26:07every address known to have belonged to them
26:09is marked as such in the tracing software.
26:12And while, as we saw in 2017 on Reddit,
26:15Jimmy's coins led right back to that fact.
26:18If he ever sold any of them on this exchange,
26:20he was screwed, but Jimmy was smarter than that.
26:23He didn't sell any of them on this exchange.
26:25He did, however, make a very poor, unfortunate mistake.
26:29The problem with crime is that you're playing for keeps.
26:32It only takes one slip up one time
26:34to get thrown in jail forever.
26:36And on September 9th, 2019,
26:38just months after calling police,
26:40Jimmy would make that mistake.
26:43He sold 118 Bitcoins on this exchange.
26:46Coins he mined himself, coins he got legally,
26:49but there's a little quirk with Bitcoin.
26:51You can't send a partial amount.
26:53Each Bitcoin address is like a piggy bank
26:55that has to be smashed open to spend the coins inside.
26:58Spend less than the whole amount in the piggy bank,
27:00and the leftovers have to be stored
27:02in a newly created piggy bank.
27:04This second piggy bank and Bitcoin system
27:07is called a change address.
27:09When you pay someone six coins from a 10 coin address,
27:12six coins go to their address and your change,
27:15four coins is stored at a new address,
27:18which your wallet software creates for you.
27:20For Jimmy, as part of his transaction selling 118 Bitcoins,
27:24a change of approximately 0.077 Bitcoins
27:28was deposited into this address,
27:31a piggy bank that had been materialized on the spot
27:33to receive the leftover coins
27:35from the one that had just been shattered.
27:37A piggy bank, which Trevor McAleenan knew belonged to Jimmy.
27:41But this still did not link him to the Silk Road funds.
27:44In fact, at this point,
27:45the IRS still had no idea Jimmy even had
27:47any involvement with the Silk Road.
27:49That was all about the change.
27:51November 24th, 2020,
27:53Jimmy was reorganizing his Silk Road funds
27:55into a different configuration,
27:57splitting the 10K Bitcoin wallet into smaller amounts,
28:0010 wallets containing 1,000 coins each.
28:03He still needed to fund that additional $32 million
28:06into his real estate development company
28:08and it's likely he was preparing these coins for sale.
28:11Three weeks pass and he splits
28:12one of these thousand coin wallets down even further,
28:15one containing 500 coins and two containing 250 coins.
28:20But he makes an awful mistake.
28:22The change wallet from earlier
28:24is included in this transaction.
28:26Jimmy at the time may not have even realized
28:28he just combined his legitimate funds
28:31associated with an exchange that knew his real identity
28:34to his Silk Road funds,
28:35something he had diligently avoided for eight years.
28:38And of course, Trevor McAleenan finds this.
28:40At first, he likely just thought he found
28:42Jimmy's hidden stash,
28:43but as he clicked further and further back
28:45in the transactions,
28:46the amount of coins just kept getting bigger and bigger.
28:492021 now, Bitcoins had skyrocketed to $61,000 a coin.
28:54Trevor had just uncovered a $3 billion secret,
28:57and eventually just like the Redditor,
29:00Trevor got to the end of the transactions.
29:02To his shock, the funds all originated from an address
29:05they had already flagged in their system,
29:07an address they had uncovered in 2013
29:10when they took down Silk Road.
29:12This shock made the case a whole lot bigger.
29:14Was Jimmy some sort of drug kingpin,
29:16maybe an unknown co-founder of Silk Road
29:19or a friend of Ross Ulbricht.
29:21To figure out those details,
29:22they were gonna have to talk to him.
29:28Less than a year after Jim Boy's big mistake,
29:30law enforcement raid both his homes.
29:33Inside the lakeside mansion stashed in a floor safe,
29:36they find $700,000 in cash and 25 Cassius coins,
29:41value at 174 Bitcoin.
29:43But the real find was in the bathroom closet.
29:46This Cheetos popcorn tin containing a computer
29:49holding all of Jimmy's Bitcoin.
29:51But despite arresting him and seizing his possessions,
29:55his Bitcoins were safe,
29:56encrypted, only accessible with a private key,
29:59and Jimmy had memorized it and for a while
30:02it looked like they weren't gonna get them.
30:04It took six months of holding him in a cage.
30:07We can see the exact moment where he breaks down on chain.
30:10March 25th, 2020, five transfers are made
30:13to a government-controlled address,
30:15but what the hell were they even charging him with?
30:17His lawyers are arguing there's no real victim here.
30:20Remember, Ross had thanked him
30:21and is doing a double life sentence
30:23with no chance of parole.
30:24In fact, it would've been illegal
30:26for Jimmy to even return the coins.
30:28And looking at the case,
30:30old Uncle Sam is doing some real mental gymnastics
30:33to claim they have a right to Jimmy's coins.
30:36It's not even a case against Jimmy,
30:37it's a case against Ross.
30:39The main crux is that when Ross was sentenced in 2015,
30:43the judge ruled all 9.9 million Bitcoin
30:46that ever passed through Silk Road
30:48are directly forfeitable of his crime,
30:50regardless if he personally retained them or not.
30:52So all 9.9 million Bitcoin that ever went through Silk Road,
30:56maybe some of which you own right now,
30:59the US government is arguing they have a right to.
31:06In total, the government got 51,680 Bitcoins from Jimmy,
31:11value at $3.4 billion during the time of the seizure.
31:15Amazingly, after nine years,
31:18he had only spent 1% of the coins,
31:20many of which were sold way before this historic rise.
31:24Nevertheless, because it wasn't the full amount,
31:26the government took every penny to Jimmy's name
31:29to make up for it,
31:30made him forfeit $42.7 million
31:33and legitimately obtained Bitcoin and property,
31:36even liquidated his 80% share in the real estate company.
31:40In court, he expressed shame and remorse.
31:43Told the judge, he always knew what he did was wrong.
31:46He said, "I think I buried my head in the sand.
31:49"It made me feel important and worth something."
31:51At 33 years old, the judge sentenced him to serve
31:54one year and one day in prison for money laundering,
31:58citing quote, "the highly sophisticated nature
32:00"of the crime," and saying,
32:01"While the victim in this case
32:02"happened to be a criminal enterprise,
32:04"the victim tomorrow could be a legitimate business."
32:08Jimmy said since his arrest,
32:09his two best friends both have quote, "new jobs"
32:12and sometimes he feels like their lack of contact with him
32:15is because he's broke.
32:17Worse, he's left with a massive tax obligation
32:19from the Bitcoin liquidated to satisfy the forfeiture.
32:22"He's sometimes wondered what's the point of life
32:25"if he's going to be alone and going to be broke."
32:28Since his arrest, he's worked as a Lyft and Uber driver.
32:31This was the second largest seizure
32:34in the history of the Department of Justice.
32:36The first, well, that's a story for another day.

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