Month: November 2022

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Security News: Repeat Armed Felon Sentenced to 102 Months in Federal Prison for Illegal Possession of Ammunition and a Firearm while on Supervised Release

Source: United States Department of Justice News

INDIANAPOLIS– Nicholas Hines, 39, of Indianapolis, was sentenced to 102 months in federal prison after pleading guilty to possession of a firearm and ammunition by a convicted felon.

According to court documents, on April 9, 2014, Hines was convicted of being a felon in possession of a firearm and was sentenced to 92 months in federal prison followed by three years of supervised release by the U.S. Probation Office. Hines was released from prison in March of 2020 and began serving his supervised release sentence. As part of the conditions of Hines’ supervised release sentence, and because he is a convicted felon, under federal law Hines is prohibited from possessing firearms and ammunition.

On December 15, 2020, federal probation officers visited Hines’ residence on Eastern Avenue in Indianapolis to conduct a compliance check. Hines met the officers at his front door but was reluctant to unlock the door and allow the officers inside his residence. Officers negotiated with Hines for several minutes before Hines unlocked the door. Hines was placed in handcuffs while the officers searched the residence.

The officers searched two upstairs bedrooms and found a box of live .38 caliber ammunition in one of the bedrooms. The box contained nineteen rounds of live ammunition, and officers estimated that five or six rounds of ammunition were missing from the box. Hines was interviewed by the officers, and he admitted that the ammunition was his, but he denied having a firearm.

U.S. Probation Officers tried to reach Hines after the December 15, 2020, visit, but they were unsuccessful, and Hines was no longer accepting phone calls. A warrant was issued to arrest Hines for violation of the terms of his release. On December 18, 2020, a federal criminal complaint was filed against Hines for unlawful possession of ammunition by a convicted felon and another warrant was issued for his arrest. Federal law enforcement officers organized a search to locate Hines to arrest him for his outstanding warrants.

On January 14, 2021, officers located Hines at a Red Roof Inn on Lynhurst Drive in Indianapolis. Hines and a woman were seen exiting the front door of the hotel and walking towards a vehicle. The officers attempted to arrest Hines, but he ran, and a foot pursuit ensued. Hines ran behind the hotel, jumped a fence, and entered an apartment complex before a pursuing officer deployed his taser, causing Hines to fall to the ground. Hines rolled over on his back revealing a revolver in his right hand. As another officer tried to approach Hines, Hines held the revolver to his own head. After a five-minute standoff, Hines dropped the revolver and was taken into custody. The revolver was loaded with five rounds of the same brand of .38 caliber ammunition found in Hines’ upstairs bedroom during the probation search.  

Zachary A. Myers, U.S. Attorney for the Southern District of Indiana; Herbert J. Stapleton, Special Agent in Charge of the FBI’s Indianapolis Field Office; and Joseph “Dan” McClain, U.S. Marshal for the Southern District of Indiana; made the announcement.

The FBI investigated the case. The U.S. Marshals Service provided valuable assistance. The sentence was imposed by U.S. District Chief Judge Tanya Walton Pratt. As part of the sentence, Judge Pratt ordered that Hines be supervised by the U.S. Probation Office for two years following his release from federal prison.

U.S. Attorney Myers thanked Assistant U.S. Attorney Jayson W. McGrath who prosecuted this case.

This case is part of Project Safe Neighborhoods (PSN), a program bringing together all levels of law enforcement and the communities they serve to reduce violent crime and gun violence, and to make our neighborhoods safer for everyone. On May 26, 2021, the Department launched a violent crime reduction strategy strengthening PSN based on these core principles: fostering trust and legitimacy in our communities, supporting community-based organizations that help prevent violence from occurring in the first place, setting focused and strategic enforcement priorities, and measuring the results.

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Security News: U.S. Attorney Announces Historic $3.36 Billion Cryptocurrency Seizure And Conviction In Connection With Silk Road Dark Web Fraud

Source: United States Department of Justice News

In November 2021, Law Enforcement Seized Over 50,676 Bitcoin Hidden in Devices in Defendant JAMES ZHONG’s Home; ZHONG Has Now Pled Guilty to Unlawfully Obtaining that Bitcoin From the Silk Road Dark Web in 2012

Damian Williams, the United States Attorney for the Southern District of New York, and Tyler Hatcher, the Special Agent in Charge of the Internal Revenue Service, Criminal Investigation, Los Angeles Field Office (“IRS-CI”), announced today that JAMES ZHONG pled guilty to committing wire fraud in September 2012 when he unlawfully obtained over 50,000 Bitcoin from the Silk Road dark web internet marketplace.  ZHONG pled guilty on Friday, November 4, 2022, before United States District Judge Paul G. Gardephe. 

On November 9, 2021, pursuant to a judicially authorized premises search warrant of ZHONG’s Gainesville, Georgia, house, law enforcement seized approximately 50,676.17851897 Bitcoin, then valued at over $3.36 billion.  This seizure was then the largest cryptocurrency seizure in the history of the U.S. Department of Justice and today remains the Department’s second largest financial seizure ever.  The Government is seeking to forfeit, collectively: approximately 51,680.32473733 Bitcoin; ZHONG’s 80% interest in RE&D Investments, LLC, a Memphis-based company with substantial real estate holdings; $661,900 in cash seized from ZHONG’s home; and various metals also seized from ZHONG’s home.

U.S. Attorney Damian Williams said: “James Zhong committed wire fraud over a decade ago when he stole approximately 50,000 Bitcoin from Silk Road.  For almost ten years, the whereabouts of this massive chunk of missing Bitcoin had ballooned into an over $3.3 billion mystery.  Thanks to state-of-the-art cryptocurrency tracing and good old-fashioned police work, law enforcement located and recovered this impressive cache of crime proceeds.  This case shows that we won’t stop following the money, no matter how expertly hidden, even to a circuit board in the bottom of a popcorn tin.”

IRS-CI Special Agent in Charge Tyler Hatcher said: “Mr. Zhong executed a sophisticated scheme designed to steal bitcoin from the notorious Silk Road Marketplace.  Once he was successful in his heist, he attempted to hide his spoils through a series of complex transactions which he hoped would be enhanced as he hid behind the mystery of the ‘darknet.’  IRS-CI Special Agents are the best in the world at following the money through cyberspace or wherever our financial investigations lead us.  We will continue to work with our partners at the US Attorney’s Office to track down these criminals and bring them to justice.”

According to the allegations contained in filings in Manhattan federal court and statements made during court proceedings:

ZHONG’s Scheme to Defraud

Silk Road was an online “darknet” black market.  In operation from approximately 2011 until 2013, Silk Road was used by numerous drug dealers and other unlawful vendors to distribute massive quantities of illegal drugs and other illicit goods and services to many buyers and to launder all funds passing through it.  In 2015, following a groundbreaking prosecution by this Office, Silk Road’s founder Ross Ulbricht was convicted by a unanimous jury and sentenced to life in prison. 

In September 2012, ZHONG executed a scheme to defraud Silk Road of its money and property by (a) creating a string of approximately nine Silk Road accounts (the “Fraud Accounts”) in a manner designed to conceal his identity; (b) triggering over 140 transactions in rapid succession in order to trick Silk Road’s withdrawal-processing system into releasing approximately 50,000 Bitcoin from its Bitcoin-based payment system into ZHONG’s accounts; and (c) transferring this Bitcoin into a variety of separate addresses also under ZHONG’s control, all in a manner designed to prevent detection, conceal his identity and ownership, and obfuscate the Bitcoin’s source. 

While executing the September 2012 fraud, ZHONG did not list any item or service for sale on Silk Road, nor did he buy any item or service on Silk Road.  ZHONG registered the accounts by providing the bare minimum of information required by Silk Road to create the account; the Fraud Accounts were merely a conduit for ZHONG to defraud Silk Road of Bitcoin.

ZHONG funded the Fraud Accounts with an initial deposit of between 200 and 2,000 Bitcoin.  After the initial deposit, ZHONG then quickly executed a series of withdrawals.  Through his scheme to defraud, ZHONG was able to withdraw many times more Bitcoin out of Silk Road than he had deposited in the first instance.  As an example, on September 19, 2012, ZHONG deposited 500 Bitcoin into a Silk Road wallet.  Less than five seconds after making the initial deposit, ZHONG executed five withdrawals of 500 Bitcoin in rapid succession — i.e., within the same second — resulting in a net gain of 2,000 Bitcoin.  As another example, a different Fraud Account made a single deposit and over 50 Bitcoin withdrawals before the account ceased its activity.  ZHONG moved this Bitcoin out of Silk Road and, in a matter of days, consolidated them into two high-value amounts.

Nearly five years after ZHONG’s fraud, in August 2017, solely by virtue of ZHONG’s possession of the 50,000 Bitcoin that he unlawfully obtained from Silk Road, ZHONG received a matching amount of a related cryptocurrency — 50,000 Bitcoin Cash (“BCH Crime Proceeds”) — on top of the 50,000 Bitcoin.  In August 2017, in a hard fork coin split, Bitcoin split into two cryptocurrencies, traditional Bitcoin and Bitcoin Cash (“BCH”).  When this split occurred, any Bitcoin address that had a Bitcoin balance (as ZHONG’s addresses did) now had the exact same balance on both the Bitcoin blockchain and on the Bitcoin Cash blockchain.  As of August 2017, ZHONG thus possessed 50,000 BCH in addition to the 50,000 Bitcoin that ZHONG unlawfully obtained from Silk Road.  ZHONG thereafter exchanged through an overseas cryptocurrency exchange all of the BCH Crime Proceeds for additional Bitcoin, amounting to approximately 3,500 Bitcoin of additional crime proceeds.  Collectively, by the last quarter of 2017, ZHONG thus possessed approximately 53,500 Bitcoin of total crime proceeds (the “Crime Proceeds”).

The Government’s Seizure of Forfeitable Property

On November 9, 2021, pursuant to a judicially authorized premises search warrant (the “Search”), IRS-CI agents recovered approximately 50,491.06251844 Bitcoin of the Crime Proceeds from ZHONG’s Gainesville, Georgia, house.  Specifically, law enforcement located 50,491.06251844 Bitcoin of the approximately 53,500 Bitcoin Crime Proceeds (a) in an underground floor safe; and (b) on a single-board computer that was submerged under blankets in a popcorn tin stored in a bathroom closet.  In addition, law enforcement recovered $661,900 in cash, 25 Casascius coins (physical bitcoin) with an approximate value of 174 Bitcoin, 11.1160005300044 additional Bitcoin, and four one-ounce silver-colored bars, three one-ounce gold-colored bars, four 10-ounce silver-colored bars, and one gold-colored coin. 

Beginning in or around March 2022, ZHONG began voluntarily surrendering to the Government additional Bitcoin that ZHONG had access to and had not dissipated.  In total, ZHONG voluntarily surrendered 1,004.14621836 additional Bitcoin.

Forfeiture Actions

In connection with ZHONG’s guilty plea, on November 4, 2022, Judge Gardephe entered a Consent Preliminary Order of Forfeiture as to Specific Property and Substitute Assets/Money Judgment forfeiting ZHONG’s interest in the following property:

  • ZHONG’s 80% interest in RE&D Investments, LLC, a Memphis-based company with substantial real estate holdings;
  • $661,900 in United States currency seized from ZHONG’s home on November 9, 2021;
  • Metal items, consisting of four one-ounce silver-colored bars, three one-ounce gold-colored bars, four 10-ounce silver-colored bars, and one gold-colored coin, all seized from ZHONG’s home on November 9, 2021;
  • 11.1160005300044 Bitcoin seized from ZHONG’s home on November 9, 2021;
  • 25 Casascius coins (physical Bitcoin) with an approximate value of 174 Bitcoin, collectively, seized from ZHONG’s home on November 9, 2021;
  • 23.7112850 Bitcoin provided by ZHONG on April 27, 2022;
  • 115.02532155 Bitcoin provided by ZHONG on April 28, 2022; and
  • 4.57427222 Bitcoin provided by ZHONG on June 8, 2022.

Today, in United States v. Ross Ulbricht, S1 14 Cr. 68 (LGS), the Government filed a motion for entry of an Amended Preliminary Order of Forfeiture, seeking to forfeit approximately 51,351.89785803 Bitcoin traceable to Silk Road, valued at approximately $3,388,817,011.90 at the time of seizure, as follows:

  • 50,491.06251844 Bitcoin seized from ZHONG’s home on November 9, 2021;
  • 825.38833159 Bitcoin provided by ZHONG on March 25, 2022; and
  • 35.4470080 Bitcoin provided by ZHONG on May 25, 2022.

*                *                *

ZHONG, 32, of Gainesville, Georgia, and Athens, Georgia, pled guilty to one count of wire fraud, which carries a maximum sentence of 20 years in prison.

The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.  ZHONG is scheduled to be sentenced by Judge Gardephe on February 22, 2023, at 3:00 p.m. 

Mr. Williams praised the outstanding work of the Internal Revenue Service, Criminal Investigation’s Western Cyber Crimes Unit of the Los Angeles Field Office.  Mr. Williams also thanked the Athens-Clarke County Police Department in Athens, Georgia, for its support and assistance with the case.  

The prosecution of this case is being overseen by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorney David R. Felton is in charge of the case.

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Security News: Choctaw Man Sentenced to Serve 8 Years in Federal Prison for Illegal Firearm Possession

Source: United States Department of Justice News

OKLAHOMA CITY – Today, a federal judge sentenced MATTHEW RAY HUTCHERSON, 32, of Choctaw, to serve 96 months in federal prison for illegal possession of a firearm, announced U.S. Attorney Robert J. Troester. Federal law prohibits convicted felons from possessing firearms or ammunition. 

On May 18, 2021, a federal grand jury returned an Indictment against Hutcherson, charging him with one count of being a felon in possession of firearms.  Public records reflect that the charge arose after Hutcherson’s ex-girlfriend reported that he pointed a firearm to her head, which led authorities to search his residence for firearms, which they found. On September 8, 2021, Hutcherson pleaded guilty to the Indictment.

At today’s sentencing, U.S. District Judge David L. Russell sentenced Hutcherson to serve 96 months in federal prison.  Judge Russell cited, among other things, Hutcherson’s criminal history and danger he posed to the community.  Public records reflect Hutcherson had convictions for child endangerment and possession of a controlled dangerous substance with intent to distribute at Oklahoma County case CF-2016-313; child abuse by injury at Cleveland County case CF-2015-2076; and driving under the influence at Cleveland County case CF-2018-1323.  Hutcherson also has a long history of domestic abuse, and has previously been subject to six different protective orders filed in Oklahoma County, including by his grandmother, mother, and ex-girlfriends.  Judge Russell also sentenced Hutcherson to serve three years of supervised release upon his release from federal prison.

This case is the result of an investigation by the United States Marshals Service and the Bureau of Alcohol, Tobacco, Firearms, and Explosives. Assistant United States Attorneys Stan West and Chelsie Pratt prosecuted the case.

This case is part of “Operation 922,” the Western District of Oklahoma’s implementation of Project Safe Neighborhood, the Department of Justice’s signature initiative to reduce gun violence and enforce federal firearms laws.  “Operation 922” prioritizes prosecution of federal crimes connected to domestic violence. For more information about “Operation 922”, visit: https://www.justice.gov/usao-wdok/project-safe-neighborhood-psn.

Reference is made to public filings for more information.

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Defense News: USS Ronald Reagan Hosts Japanese Prime Minister during International Fleet Review

Source: United States Navy

Guided-missile cruiser USS Chancellorsville (CG 62) participated in the parade of ships while Prime Minister Kishida served as reviewing officer from aboard JS Izumo (DDH 183). Kishida visited Ronald Reagan following the review of ships and was welcomed by U.S. Ambassador to Japan, the Honorable Rahm Emanuel, and Chief of Naval Operations (CNO), Adm. Michael Gilday.

Prime Minister Kishida and Ambassador Emanuel discussed the importance of the U.S. – Japan alliance, while touring the ship, meeting Sailors and engaging with leadership aboard Ronald Reagan. During his time aboard, Ambassador Emanuel took time to address the crew of Ronald Reagan over the ship’s intercom system.

“On behalf of the entire United States I want to say a very simple, but much needed, thank you,” said Emanuel. “A lot of times in America, we have a debate about what represents the one percent. You who have volunteered on behalf of our ideals, our values and our interests, represent the true one percent of America. Thank you for your selfless sacrifice.”

IFR is an exercise that includes navies from numerous countries to strengthen and develop maritime partnerships. This year’s event celebrated the Japan Maritime Self-Defense Force’s (JMSDF) 70th anniversary.

CSG 5 crews integrated with JMSDF and other participating navies to strengthen interoperability and further develop maritime partnerships through team-building good will events ashore, the parade of ships at sea, as well as a multilateral search and rescue exercise.

While aboard Reagan, CNO spoke with Sailors, while also presenting awards and conducting a re-enlistment ceremony.

“What we ask you to do out here is incredibly important, and I can never understate that,” said Gilday. “Whether you’re working down in the engineering spaces, whether you’re in a supply parts storeroom, whether you’re in AIMD [Aircraft Intermediate Maintenance Department], whether you’re serving meals, whether you’re working in the hangar, or you’re working on the flight deck and everywhere in between just know that you are on a phenomenal team. I thank you all for what you’re doing.”

Chancellorsville, USS Higgins (DDG 76) and the Ronald Reagan Carrier Strike Group are forward-deployed to the U.S. 7th Fleet area of operations in support of security and stability in the Indo-Pacific. U.S. 7th Fleet is the largest numbered fleet in the world, and with the help of 35 other maritime-nation Allies and partners, the U.S. Navy has operated in the Indo-Pacific region for more than 70 years, providing credible, ready forces to help preserve peace and prevent conflict.

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Defense News: USCGC Hamilton (WMSL 753) arrives in Turku, Finland

Source: United States Navy

While in Turku, Hamilton leadership will meet with government and Finnish Navy and Finnish Border Guard leaders and will host tours for the local Finnish public.

“We are honored and enthusiastic to call on the historic city of Turku. This visit is oriented to build on the decades-long partnership between the United States and Finland,” said Capt. Matthew Brown, commanding officer of USCGC Hamilton (WMSL 753). “The U.S. Coast Guard’s collaboration with the Finnish Border Guard advances our shared ambitions of peace and security in the Baltic Sea.”

Prior to arriving in Turku, Hamilton conducted multiple operations with allies and partners in the Baltic Sea, including a series of search and rescue and law enforcement boarding exercises with the Swedish Coast Guard. Working alongside regional partners improves participants’ ship handling, communication, and tactical precision.

Hamilton departed Charleston, South Carolina, in October for a scheduled deployment to the NAVEUR area of operations, demonstrating the Coast Guard’s welcome presence and key contribution in maintaining maritime safety, security, and stability in the region. The ship conducted a port visit at Naval Station Rota, Spain, in October, before sailing north to the Baltic region.

This deployment builds upon NAVEUR’s ongoing mission of reassuring the NATO Alliance and advancing interoperability within the maritime domain and continues to hone the ship’s proficiency in the region. Hamilton previously deployed to European waters in 2021, where the cutter conducted maritime exercises with multiple NATO Allies and partners.

The U.S. Coast Guard’s forward deployed presence demonstrates the continued commitment to maritime security and stability in Europe and Africa. Since 2019, Coast Guard cutters have operated in the U.S. Sixth Fleet area of operations, demonstrating NAVEUR’s commitment and collective defense of the European region. The U.S. Navy and U.S. Coast Guard operate forward, from the littoral to the open ocean, ensuring stability and open sea lanes across all maritime domains.

Hamilton is the fourth ship in its class. The Legend-class is the largest current cutter class of the U.S. Coast Guard. These vessels support various missions, including environmental protection, search and rescue, fisheries, port security, counterterrorism, law enforcement, drug interdiction, defense operations, and other military operations

For over 80 years, U.S. Naval Forces Europe-U.S. Naval Forces Africa (NAVEUR-NAVAF) has forged strategic relationships with our Allies and Partners, leveraging a foundation of shared values to preserve security and stability.

Headquartered in Naples, Italy, NAVEUR-NAVAF operates U.S. naval forces in the U.S. European Command (USEUCOM) and U.S. Africa Command (USAFRICOM) areas of responsibility. U.S. Sixth Fleet is permanently assigned to NAVEUR-NAVAF, and employs maritime forces through the full spectrum of joint and naval operations.