In the bustling city of Athens, Georgia, known for its vibrant university scene and all-too-familiar college town shenanigans, the police were used to dealing with crimes like barroom brawls, break-ins, and the occasional riot. However, on the evening of March 13, 2019, they received a call that was anything but typical.
The call came from Jimmy Zhong, a 28-year-old local and Georgia University alum, who was a regular at the bars. Besides his penchant for partying, Zhong was a computer expert with an advanced digital security system installed at his home.
Zhong's call to the police that night reported a theft of hundreds of thousands of dollars worth of cryptocurrency. The thought of his lost funds sent Zhong into a panic, exclaiming, "I'm having a panic attack!"
In a twist of fate, this seemingly ordinary call would unravel a nearly decade-long chase, expose a major cryptocurrency crime in the age of digital assets, and lead to the second-largest cryptocurrency seizure in the history of the U.S. Department of Justice. Little did Zhong know what lay ahead.
Local law enforcement initially struggled with the case, making no headway in identifying suspects. It was clear they lacked experience in handling cryptocurrency-related crimes, leading to a slow investigation process. Frustrated, Zhong decided to enlist the help of a local private investigator, Robin Martinelli, who ran her own detective agency in Loganville, Georgia.
Despite her lack of expertise in the cryptocurrency field, Martinelli had a wealth of experience in dealing with infidelity and custody cases. She was even featured on "The Montel Williams Show," a popular American talk show focused on social issues. Martinelli was determined to assist Zhong, even as she recovered from a leg amputation due to illness.
Martinelli began her investigation by reviewing the security footage at Zhong's home. While going through the footage from the night of the theft, she identified a slim figure wearing a gray hat and a black ski mask. This suspect appeared to be familiar with Zhong's residence, leading Martinelli to believe it might be someone close to Zhong or at least someone who knew about his Bitcoin holdings. Through the videos, she even determined the suspect's height and hand size.
She started surveilling Zhong's friends, tracking them to their residences, and bars in the Broad Street and College Avenue district. Martinelli discreetly installed tracking devices on their vehicles, scoured their social media, and conducted background checks.
As she observed Zhong's circle of friends in the bars, Martinelli couldn't help but express her skepticism about them. She described this so-called friends' group as "casual, insincere, and possibly taking advantage of Jimmy." Zhong, however, appeared to be resistant to her speculations, likely due to the emotional distress of discovering that people close to him might betray him.
Despite her disappointment with Zhong's friends, Martinelli grew fond of her client. She saw him as an eccentric individual who longed for companionship. "Jimmy just wants to be loved. He wants friends," she said.
Before the theft, Zhong had gained a reputation for his lavish spending in town, known for picking up tabs at bars for all the patrons and buying expensive items from luxury brands like Louis Vuitton, Gucci, and Jimmy Choo. He even owned high-end vehicles like Tesla and a lakeside mansion in Gainesville, Georgia, with watercraft, a stripper pole, and an abundance of alcohol.
While no one knew the source of his income, Zhong had claimed to have been involved with Bitcoin since its early days in 2009. He touted himself as a Bitcoin investor, having mined thousands of coins when the cryptocurrency was in its infancy.
In 2018, when his beloved Georgia Bulldogs football team made it to the Rose Bowl, Zhong gathered a small group of friends for a luxurious pilgrimage to Los Angeles. He chartered a private plane, provided each friend with a $10,000 spending limit, and allowed them to indulge in shopping sprees on Rodeo Drive.
One of his friends, Stefana Masic, described the experience, saying, "I had never been on a private plane before or stayed in such an amazing Airbnb. It was cool because, you know, I got to experience a lot of things I wouldn't have otherwise."
Unbeknownst to Zhong, while he was cheering on his team in Los Angeles, a group of investigators from the Criminal Investigation Division of the Internal Revenue Service (IRS-CI) had been diligently working on a long-standing criminal case under the guidance of city officials.
Their investigation was triggered by a 2012 hacking incident, where an individual had stolen 50,000 Bitcoins from the Silk Road, one of the earliest dark web marketplaces where anonymous buyers and sellers traded various illegal items, including drugs, firearms, and adult content.
Over the years, the value of the stolen Bitcoins had surged to over $3 billion. While investigators could track the movement of these coins on the public blockchain, they couldn't ascertain the true owner of the funds. They had been patiently waiting and observing how the hacker transferred funds between accounts and used mixing services to obscure the money's origin.
Then, a blockchain analysis company called Chainalysis, which had been tracking the stolen assets from the Silk Road, discovered a crucial error made by the hacker. They transferred approximately $800 worth of cryptocurrency to a cryptocurrency exchange, a platform that adhered to banking regulations, requiring account holders to provide their real names and addresses to complete Know Your Customer (KYC) procedures.
The account was registered in Jimmy Zhong's name, and the transfer occurred in September 2019, six months after Zhong had reported the theft to local police.
Although this piece of evidence was not enough to convict Zhong, it did serve as a starting point for investigators. The IRS contacted the Athens-Clarke County Police Department for assistance. Local law enforcement had been stalling on Zhong's case, so they gladly cooperated.
Jody Thompson, a lieutenant in the Property and Financial Crimes Unit of the local police, received the IRS agent's call. She said, "I got a call from the IRS agent, and he said, 'Can I come talk to you about Jimmy?' At that point, I thought, of course, I remember that case."
Thompson, along with IRS-CI agents Trevor McAleenan and Shaun MaGruder, formed a task force to investigate Zhong. Shaun MaGruder was the CEO of BlockTrace, a cybersecurity and blockchain intelligence firm that excelled in solving complex blockchain transaction issues, making him a valuable asset to the team.
Together, the three investigators devised a plan to approach Zhong under the pretext of helping him solve his cryptocurrency theft case. In reality, they were building a case against Zhong for his alleged crimes, now worth billions of dollars.
In exclusive footage captured by law enforcement cameras, the investigators knocked on the door of Zhong's Gainesville lakeside residence. Zhong welcomed them warmly, thinking they were there to help him resolve his cryptocurrency theft case.
Little did he know that his life was about to take a dramatic turn. The investigators had already traced his connections, connected the dots, and were on the brink of unmasking the mysterious hacker who had stolen Bitcoins from the Silk Road. This was the beginning of the "Crypto Caper" that would send shockwaves through the cryptocurrency world, leaving a lasting impression on the town of Athens, Georgia, and the entire nation.
What happened next in the "Crypto Caper" will unravel the intricacies of cryptocurrency theft, money laundering, and the pursuit of justice in the digital age, raising questions about the trustworthiness of those close to us and the potential risks of flaunting one's wealth. It is a story that highlights the critical role of the IRS and blockchain analytics in solving cryptocurrency-related crimes, and it underscores the unique challenges of law enforcement in the fast-evolving landscape of digital assets.
