$15 billion Bitcoin mystery: Did the U.S. government seize 127,000 BTC from "pig-butchering scams" or the LuBian Mining Pool?

The U.S. Department of Justice (DOJ) announced its largest asset seizure operation in history, confiscating nearly $15 billion worth of 127,271 Bitcoins. The indictment accuses Chen Zhi, chairman of the Cambodian Prince Holding Group, of operating a criminal organization that combines online gambling, “Pig-butchering scams,” and forced labor, and laundering money through a large-scale crypto mining operation. However, on-chain analysis shows that nearly all of the seized Bitcoins originated from a significant Private Key leak incident involving the Chinese mining company LuBian in 2020, which complicates the nature and ownership of the case.

The Largest Bitcoin Seizure in History: The Money Laundering Maze of Criminal Organizations

The indictment from the U.S. Department of Justice reveals a complex and vertically integrated transnational criminal organization, whose money laundering network involves crypto mining companies, such as Warp Data in Laos and LuBian in China.

“Pig-butchering scams” leader and Money Laundering network

Chen Zhi, the chairman of Prince Holding Group, was accused of using his businesses, including a large crypto mining operation, to launder billions of dollars in illegal proceeds. The indictment specifically listed wallet addresses and mnemonic records that Chen “personally maintained”, but strangely, these addresses had almost no Bitcoin balance at the time they were seized.

on-chain analysis reveals astonishing overlaps

The confiscated 127,271 Bitcoins almost all came from wallets associated with the LuBian.com hackers. LuBian, this opaque Chinese mining enterprise, suffered one of the largest Private Key leaks in crypto history in 2020, when approximately 127,000 Bitcoins were stolen due to the “Milk Sad” entropy flaw. Shockingly, the weak entropy wallet addresses identified by the cybersecurity team Distrust completely match the list of addresses that the DOJ claims Chen has Private Key records for.

Institutional Interpretation: A Trap of “Insider” or “Fake Theft”

Galaxy Research believes that the high consistency of time, amount, and on-chain analysis strongly suggests that the Prince Group and LuBian may not be independent entities, but rather two branches of the same criminal organization.

Vertical Integration of Crime and Mining

The same group of people operating “Pig-butchering scams” and offshore casinos likely owns or controls the LuBian mining business, and the “theft incident” in 2020 is more likely an “insider” operation, or even a fabricated hack, aimed at burying illegal gains and reporting tax losses. The Justice Department claims to have seized the Private Key owned by Chen, indicating that this is not a cryptographic miracle of “NSA cracking Bitcoin,” but rather a traditional criminal investigation akin to “FBI breaching cloud storage.”

Thorny ownership disputes and sovereign deadlock

Potential Appeal of LuBian

If LuBian is an independent entity, it could theoretically apply to the court to recover the stolen Bitcoin.

The reality of the dilemma

However, LuBian is a Chinese registered mining company accused of money laundering through Cambodian criminal groups, and the current trade relations between China and the United States are in a “comprehensive transaction freeze” state. The possibility of a federal judge ordering the Treasury to return $15 billion in Bitcoin to mainland Chinese entities is extremely low.

The U.S. Government Becomes a “Whale” in Bitcoin: Has Never Received Accumulation

The significance of this seizure has transcended the criminal case itself, profoundly impacting the United States' Bitcoin strategic reserves.

expansion of strategic reserves

The confiscation has increased the U.S. government's Bitcoin reserves by 64% overnight, and in dollar value, its reserves have reached about 3.5% of the U.S. gold reserves. This means that the number of Bitcoins held by the U.S. government now exceeds that of any single entity, except for the company owned by Michael Saylor.

Law enforcement is accumulation

Since March, the U.S. presidential executive order has required the Treasury to retain confiscated digital assets as a “digital hard currency” strategic reserve, rather than selling them. This means that the U.S. “law enforcement” actions have evolved into an accumulation strategy for Bitcoin. Bitcoin, the digital currency that was originally born out of the anti-fiat spirit, is gradually becoming part of the collateral stack for fiat currency.

Conclusion

The U.S. Department of Justice's seizure of 127,000 Bitcoins is not only an unprecedented operation to recover criminal assets but also a perplexing maze regarding Bitcoin ownership, national strategic reserves, and the paradox of the crypto punk spirit. In the face of massive amounts and complex transnational crime networks, the ideal of Bitcoin's “decentralization” seems to be captured by the state's “accumulative law enforcement.”

Disclaimer: This article is for news information only and does not constitute any investment advice. The crypto market is highly volatile, and investors should make cautious decisions.