The 2020 Lubian Hack and Chen Zhi Connection

In 2020, the Lubian mining pool was targeted in a cyberattack, resulting in the theft of 127,000 BTC. Later, the stolen Bitcoins were linked to Cambodian businessman Chen Zhi. The U.S. Department of Justice (DOJ) accuses Chen Zhi of running large-scale cryptocurrency fraud and money laundering operations. In this context, CVERC alleges that the U.S. may have indirectly supported the attack and disguised its seizure as a legitimate operation.

“This is a typical example of a state-level hacking organization orchestrating the theft while the ‘thieves clash among themselves,’” CVERC commented.

The CVERC report also stated, “The attack was carried out using advanced tools, suggesting a state-sponsored hacker group. The U.S. seizure may be part of a larger operation involving the same attackers.”

2024 Transfers and Blockchain Analysis

The stolen Bitcoin remained dormant for nearly four years. Subsequently, in mid-2024, they were quietly transferred to new wallets. Blockchain analysis firm Arkham Intelligence later traced these wallets to the U.S. government. This development prompted CVERC to investigate U.S. involvement.

U.S. Response and International Tensions

The DOJ rejected China’s allegations, stating that the Bitcoin were part of Chen Zhi’s fraud and money laundering network, and that the seizure was a legitimate law enforcement operation.

The incident highlights rising tensions between the U.S. and China over cybersecurity and global control of digital assets. Cryptocurrencies are increasingly becoming a strategic tool of national power.

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According to the U.S. Department of Justice (DOJ), Ahlgren “falsely underreported the realized capital gains” from selling Bitcoin worth $3.7 million between 2017 and 2019. The DOJ stated on December 12 that “all taxpayers are required to report any sale proceeds and gains or losses from the sale of cryptocurrency, such as Bitcoin, on a tax return.”

Ahlgren, who had invested in Bitcoin since 2011, bought 1,366 BTC on Coinbase in 2015 when Bitcoin was priced under $500. He later sold about 640 BTC in October 2017 at an average price of $5,807.53 and reinvested the $3.7 million in real estate. Authorities discovered discrepancies in his 2017 federal income tax return, where Ahlgren inflated the cost basis of his Bitcoin holdings, thus underreporting his true capital gain.

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Additionally, Ahlgren failed to report more than $650,000 in Bitcoin sales in 2018 and 2019. The DOJ indicated that he attempted to hide the movement of his funds using wallet transfers, crypto mixers, and cash transactions. Notably, in May 2014, Ahlgren had blogged about using mixers for Bitcoin transactions.

The criminal tax evasion case culminated in a two-year prison sentence for Ahlgren, making it the first criminal tax evasion prosecution focused solely on cryptocurrency. The Internal Revenue Service’s Criminal Investigation Houston Field Office stated that Ahlgren’s belief that his crypto transactions were untraceable led to his conviction.

In addition to the prison sentence, Ahlgren was ordered to pay $1.1 million in restitution to the U.S. government and serve one year of supervised release.

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