The seizure by US authorities of US$13.4 billion worth of bitcoin from an alleged Cambodian criminal has raised questions over the safety of the digital assets and prompted frantic speculation in the crypto community over how the feat was accomplished.
Weak private keys and insider theft could have made it possible for US law-enforcement agencies to track down the bitcoin privately held by Chen Zhi, who is accused of running a massive “pig butchering” operation in Cambodia, according to experts. Bitcoin has become a popular asset for global underground operations owing to its anonymity.
The US Department of Justice (DOJ) said earlier this week that it had seized 127,271 bitcoins from the Prince Holding Group chairman. Chen, who was born in China and holds British and Cambodian citizenship, was charged with wire fraud conspiracy and money laundering conspiracy for running forced-labour scam compounds across Cambodia.
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Chen maintained the private keys for 25 unhosted cryptocurrency wallets where the bitcoin were stored, and the funds are now in the custody of the US government, according to a DOJ statement, which added that it was the largest asset forfeiture in the department’s history.
While the DOJ did not detail how it acquired control of Chen’s bitcoin, the seizure was “plausibly connected” to an earlier “chain of movements”, according to Angela Ang, head of policy and strategic partnerships for APAC at blockchain research firm TRM Labs. The funds from Chen’s 25 wallets changed custody in December 2020, and the DOJ’s forfeiture complaint hinted at the possibility that an insider had stolen the bitcoin at that time, Ang said.
A pig-butchering scam lures victims into making increasing financial contributions over a long period of time, usually in the form of cryptocurrency. The name evokes the fattening up of livestock before slaughter.
The seizure is the latest case to show that law-enforcement agencies can confiscate crypto. Earlier this year, a 47-year-old Chinese woman, Qian Zhimin, alias Zhang Yadi, pleaded guilty at London’s Southwark Crown Court following what was then the largest cryptocurrency seizure at US$6 billion.
China’s People’s Daily in July reported details of a crackdown on a money-laundering operation involving cryptocurrencies, shedding light on the mainland’s underground crypto landscape and increased efforts by authorities to seize crypto assets. A convicted criminal was sentenced to 14 years after he was forced to surrender 90 “hidden” bitcoin valued at US$9.5 million.
