China Accuses U.S. of Illegally Seizing $13B in Bitcoin

The dispute centers on 127,272.06 Bitcoin that remained dormant for four years before being moved to U.S.-controlled wallets in mid-2024. According to the U.S. Department of Justice, the cryptocurrency represented criminal proceeds from Cambodian businessman Chen Zhi’s alleged ‘pig-butchering’ scam operation involving forced labor and crypto fraud. However, CVERC’s technical report issued Sunday presents a radically different account, alleging the Bitcoin was actually stolen from the LuBian mining pool in a December 29, 2020 hack.

CVERC’s analysis claims the addresses listed in the DOJ’s indictment of Chen Zhi correspond directly to those compromised in the 2020 LuBian breach. The Chinese agency cites blockchain intelligence firms Elliptic and Arkham Intelligence to support its position that the seized funds originated from compromised mining operations in China and Iran rather than criminal activities. This fundamental disagreement over the Bitcoin’s origins has created an international standoff with billions of dollars at stake.

The Bitcoin in question followed an unusual four-year trajectory before reaching U.S. government custody. Following the alleged 2020 hack from LuBian mining pool—where the Bitcoin was reportedly valued at $3.5 billion—the funds remained completely untouched despite their enormous value. During this period, Chen’s team reportedly sent blockchain messages in 2021 and 2022 offering a ransom for the return of the funds, suggesting they believed the assets had been stolen by hackers rather than being properly seized by authorities.

The situation changed dramatically in mid-2024 when the Bitcoin began moving. According to TRM Labs head of policy and strategic partnerships for Asia Pacific Angela Ang, on-chain activity indicates the next major movement occurred between June and July 2024. ‘The funds are now in U.S. government custody,’ Ang told Decrypt, suggesting that ‘the 2024 transactions likely represent the transfer of those assets into their possession.’ This timing coincides with the DOJ’s October 14 announcement about the seizure, after which approximately $2 billion worth of Bitcoin were moved to new wallets.

CVERC’s most explosive allegation claims the U.S. government ‘may have already stolen the 127,000 bitcoins held by Chen Zhi through hacking techniques back in 2020, making [the seizure] a typical ‘black-eats-black’ operation orchestrated by a state-level hacking organization.’ This characterization suggests Chinese authorities believe the U.S. conducted the original theft and is now legitimizing it through legal proceedings. The allegations were first reported by the Global Times, an English-language tabloid run by the People’s Daily, the official state newspaper of the Chinese Communist Party.

Blockchain intelligence firms have provided partial clarity while acknowledging significant gaps in understanding. TRM Labs confirmed with Decrypt that the seized Bitcoin ‘originated from 25 unhosted wallets controlled by Chen as of 2020’ according to their research. However, Angela Ang acknowledged limitations in understanding how U.S. authorities gained control, stating ‘Right now we don’t have hard answers as to how the funds came to be in U.S. government custody, but it is plausibly connected to the earlier chain of movements.’ She noted the DOJ forfeiture complaint hints that ‘an insider stole the money’ from Prince Group’s perspective.

The involvement of multiple blockchain intelligence firms—including Elliptic, Arkham Intelligence, and TRM Labs—highlights the complexity of tracing cryptocurrency movements across international borders. While these firms can confirm wallet ownership and transaction patterns, the mechanisms through which governments gain control of digital assets remain partially obscured, leaving room for competing interpretations and allegations between nation-states with conflicting interests.