8 ms·

I may get slammed for this, but I don’t understand the resources that apparently went into tracking down some kid who stole from an illegal marketplace a decade

I may get slammed for this, but I don’t understand the resources that apparently went into tracking down some kid who stole from an illegal marketplace a decade again. This feels way less like “pursing justice” and more like trying to track down everything the just I’ve department can seize and auction off. If Bitcoin hadn’t drastically increased in value since the original event, would this have ever been tracked down? I cant even count the number of much more consumer-impacting crypto-related frauds, crimes, and hacks from the last 3 years that would be more deserving of justice department attention, rather than focusing resources and attention on a double withdrawal bug from an illegal marketplace from a decade ago.

adam_arthur 4y ago
I agree, we should let crypto scams of all kinds proliferate and flourish. Just kidding, haha. I agree that many more recent events have been more impactful, and hopefully they’re pursuing those too. I mean the sheer numbers of ICOs with somewhat notable people involved purely to make a quick buck would be a good place to start
xyzzy4747 4y ago
It’s probably because he accumulated billions of dollars of property that weren’t taxed, and illegally on top of that (although they were worth much less at the time). It kind of sucks for him that he had to forfeit the Bitcoin and not just the dollar amount he stole at the time. I am sure if it was the other way around, and Bitcoin went to $0, they would take the historical dollar amount he stole instead.
- nrmitchi 4y ago
  I could completely see an argument for tax evasion, that is a crime where the technical victim is the government (and thus, citizenry), not where the victim is an illegal operation that no longer exists. However, he isn’t being charged with a tax crime. He’s being charged with “wire fraud” for double withdrawing from Silk Road.
  - jamespo 4y ago
    So committing a crime against criminals is OK?
    - nrmitchi 4y ago
      I can see you just trying to bait me into a non-productive debate, so I will say this. I am not going to make any statement regarding whether or not financial crimes against known and convicted criminal enterprises should be deprioritized in relation to crimes against regular citizens. In this case though, the "victim" has not existed for over 9 years and will never exist in the future, there are no ongoing victism, and there are no downstream victims to return restitution to. I do not believe the justice department should be pursuing cases (cold or not) where the only goal is siezing (not recovering) assets for their own benefit.
- jeremyjh 4y ago
  Capital gains are not taxable until they are realized through sale of the assets. I would not expect he had any tax liability yet.
  - xyzzy4747 4y ago
    Stealing an asset and keeping it is considered “income” in that tax year, I believe. You would only be correct if he stole Bitcoin when it was worth 0, but it wasn’t.
    - jeremyjh 4y ago
      That's true, he'd owe taxes on the $500k it was worth at the time.
garyfirestorm 4y ago
Low hanging fruit. We recovered X.y billion in BTC (valued at that time) hand waving, patting each others back. Instant promotion.
michaelt 4y ago
> I don’t understand the resources that apparently went into tracking down some kid who stole from an illegal marketplace a decade again. 1. I suspect that the justice system feels that, as a matter of principle, they ought to keep the heat on darknet markets generally. That getting darknet market related arrests in the news has deterrent value, and shows they're doing their job. Obviously, arresting operators or big sellers would be even better - but any darknet market arrests are better than none at all. 2. They recovered $3.3 Billion, so the ROI on agents' time is probably pretty good. American society loves it when police departments are funded with criminals' money, through aggressive traffic ticketing and civil forfeiture! So this is really no different to fining a driver for doing 55 in a 54, except with much less police time used. From a certain perspective, this is one of the most productive uses of resources the department could possibly make.
- nrmitchi 4y ago
  1. I agree, it’s a bit tangential to call this a “darknet market arrest” instead, since the “darknet market” was the “victim”. 2. People largely hate when cops find someone for doing 55 in a 54, so it’s probably not a great example, but I think supports my point. This isn’t about solving an actual crime, but about optimizing for how much money the justice department is able to collect. I said elsewhere that this would be more reasonable as a tax investigation, but it’s not, and it’s (in my opinion) a pretty bad precedent that investigations should be prioritized by “how much cash can we seize”
  - dragonwriter 4y ago
    > I said elsewhere that this would be more reasonable as a tax investigation It was also a tax investigation, which is why IRS criminal investigatoes were involved, and there clearly were tax violations involved, they just weren’t part of the plea bargain. > it’s (in my opinion) a pretty bad precedent that investigations should be prioritized by “how much cash can we seize” I agree that prioritizing prosecutions that way would be, but Zhong doesn’t seem to have particularly been a prosecutorial priority. OTOH, spending investigative resources to find know forfeitable assets under an existing conviction seems a perfectly sane and responsible use of resources
nathanvanfleet 4y ago
You're right it sounds like he's a real nice guy and sitting on 3.36 billion dollars for a decade sounds like time served to me. I just can't get behind the concept of "Why did they arrest me for X when there is something wrong happening over there?" It just doesn't work that way, there are plenty of things happening ant the same time and you're just making some weird assumption that the IRS bitcoin task force could have been some completely different department chasing a completely different crime.
- keepquestioning 4y ago
  This is Hacker News, different morality applies here
pessimizer 4y ago
> I may get slammed for this, but I don’t understand the resources that apparently went into tracking down some kid who stole from an illegal marketplace a decade again. If you're not going to track down $3.36B after a decade, you really shouldn't pursue thefts of less than $1M ever.
- deleted 4y ago
  [deleted]
paulpauper 4y ago
They were not just any bitcoin, they were missing silk road bitcoin. The fed had been looking for these 50k btc for awhile.
Scoundreller 4y ago
I doubt they’ve been actively investigating him for 10y. Probably went through the transaction logs right at the beginning and flagged the addresses. Big withdraws suggests seller. Big deposits and withdraws without sales suggests launderer. Small deposits, or sales and big withdraws suggests insider. Dude finally slipped up and got identified.
swalsh 4y ago
If we ever go back into a mercantilist economy based on bitcoin, the US is setting itself up to be in a solid position.
conductr 4y ago
Since there continues to be "crypto-related frauds, crimes, and hacks" then they need skilled group of crypto investigators. Think of this case as practice.
dragonwriter 4y ago
> I may get slammed for this, but I don’t understand the resources that apparently went into tracking down some kid who stole from an illegal marketplace a decade again They found the kid in the process of looking for the missing forfeitable BTC from Silk Road. Which explains why the resources...

adam_arthur 4y ago

I agree, we should let crypto scams of all kinds proliferate and flourish. Just kidding, haha. I agree that many more recent events have been more impactful, and hopefully they’re pursuing those too. I mean the sheer numbers of ICOs with somewhat notable people involved purely to make a quick buck would be a good place to start

xyzzy4747 4y ago

It’s probably because he accumulated billions of dollars of property that weren’t taxed, and illegally on top of that (although they were worth much less at the time). It kind of sucks for him that he had to forfeit the Bitcoin and not just the dollar amount he stole at the time. I am sure if it was the other way around, and Bitcoin went to $0, they would take the historical dollar amount he stole instead.

nrmitchi 4y ago
I could completely see an argument for tax evasion, that is a crime where the technical victim is the government (and thus, citizenry), not where the victim is an illegal operation that no longer exists. However, he isn’t being charged with a tax crime. He’s being charged with “wire fraud” for double withdrawing from Silk Road.
- jamespo 4y ago
  So committing a crime against criminals is OK?
  - nrmitchi 4y ago
    I can see you just trying to bait me into a non-productive debate, so I will say this. I am not going to make any statement regarding whether or not financial crimes against known and convicted criminal enterprises should be deprioritized in relation to crimes against regular citizens. In this case though, the "victim" has not existed for over 9 years and will never exist in the future, there are no ongoing victism, and there are no downstream victims to return restitution to. I do not believe the justice department should be pursuing cases (cold or not) where the only goal is siezing (not recovering) assets for their own benefit.
jeremyjh 4y ago
Capital gains are not taxable until they are realized through sale of the assets. I would not expect he had any tax liability yet.
- xyzzy4747 4y ago
  Stealing an asset and keeping it is considered “income” in that tax year, I believe. You would only be correct if he stole Bitcoin when it was worth 0, but it wasn’t.
  - jeremyjh 4y ago
    That's true, he'd owe taxes on the $500k it was worth at the time.

garyfirestorm 4y ago

Low hanging fruit. We recovered X.y billion in BTC (valued at that time) hand waving, patting each others back. Instant promotion.

michaelt 4y ago

> I don’t understand the resources that apparently went into tracking down some kid who stole from an illegal marketplace a decade again. 1. I suspect that the justice system feels that, as a matter of principle, they ought to keep the heat on darknet markets generally. That getting darknet market related arrests in the news has deterrent value, and shows they're doing their job. Obviously, arresting operators or big sellers would be even better - but any darknet market arrests are better than none at all. 2. They recovered $3.3 Billion, so the ROI on agents' time is probably pretty good. American society loves it when police departments are funded with criminals' money, through aggressive traffic ticketing and civil forfeiture! So this is really no different to fining a driver for doing 55 in a 54, except with much less police time used. From a certain perspective, this is one of the most productive uses of resources the department could possibly make.

nrmitchi 4y ago
1. I agree, it’s a bit tangential to call this a “darknet market arrest” instead, since the “darknet market” was the “victim”. 2. People largely hate when cops find someone for doing 55 in a 54, so it’s probably not a great example, but I think supports my point. This isn’t about solving an actual crime, but about optimizing for how much money the justice department is able to collect. I said elsewhere that this would be more reasonable as a tax investigation, but it’s not, and it’s (in my opinion) a pretty bad precedent that investigations should be prioritized by “how much cash can we seize”
- dragonwriter 4y ago
  > I said elsewhere that this would be more reasonable as a tax investigation It was also a tax investigation, which is why IRS criminal investigatoes were involved, and there clearly were tax violations involved, they just weren’t part of the plea bargain. > it’s (in my opinion) a pretty bad precedent that investigations should be prioritized by “how much cash can we seize” I agree that prioritizing prosecutions that way would be, but Zhong doesn’t seem to have particularly been a prosecutorial priority. OTOH, spending investigative resources to find know forfeitable assets under an existing conviction seems a perfectly sane and responsible use of resources

nathanvanfleet 4y ago

You're right it sounds like he's a real nice guy and sitting on 3.36 billion dollars for a decade sounds like time served to me. I just can't get behind the concept of "Why did they arrest me for X when there is something wrong happening over there?" It just doesn't work that way, there are plenty of things happening ant the same time and you're just making some weird assumption that the IRS bitcoin task force could have been some completely different department chasing a completely different crime.

keepquestioning 4y ago
This is Hacker News, different morality applies here

pessimizer 4y ago

> I may get slammed for this, but I don’t understand the resources that apparently went into tracking down some kid who stole from an illegal marketplace a decade again. If you're not going to track down $3.36B after a decade, you really shouldn't pursue thefts of less than $1M ever.

deleted 4y ago
[deleted]

paulpauper 4y ago

They were not just any bitcoin, they were missing silk road bitcoin. The fed had been looking for these 50k btc for awhile.

Scoundreller 4y ago

I doubt they’ve been actively investigating him for 10y. Probably went through the transaction logs right at the beginning and flagged the addresses. Big withdraws suggests seller. Big deposits and withdraws without sales suggests launderer. Small deposits, or sales and big withdraws suggests insider. Dude finally slipped up and got identified.

swalsh 4y ago

If we ever go back into a mercantilist economy based on bitcoin, the US is setting itself up to be in a solid position.

conductr 4y ago

Since there continues to be "crypto-related frauds, crimes, and hacks" then they need skilled group of crypto investigators. Think of this case as practice.

dragonwriter 4y ago

> I may get slammed for this, but I don’t understand the resources that apparently went into tracking down some kid who stole from an illegal marketplace a decade again They found the kid in the process of looking for the missing forfeitable BTC from Silk Road. Which explains why the resources...