A complaint filed by the United States District Court for the Eastern District of New York has caused a storm in the cryptocurrency world.

On October 14, the U.S. Department of Justice announced criminal charges against Chen Zhi, the founder of the Prince Group in Cambodia, and requested the seizure of 127,271 BTC under his control, valued at approximately $15 billion, making it the largest judicial seizure of Bitcoin globally.

"The most significant virtual asset seizure in history," the Department of Justice stated in its announcement, using highly cautionary language. Moreover, the official emphasized that these BTC were not stored on exchanges but had been kept for a long time by Chen Zhi himself through non-custodial private wallets. This seems to challenge the core belief of the crypto community: "If you hold the private key, your assets are untouchable."

In fact, even without cracking encryption algorithms, the U.S. government can still complete the "judicial transfer" of assets through legal procedures. Through on-chain tracking and international cooperation, law enforcement identified Bitcoin addresses scattered across multiple locations but all controlled by Chen Zhi. The court then issued a seizure order, legally transferring these assets to U.S. government-controlled addresses, entering the judicial custody process, and awaiting the final civil forfeiture judgment.

At the same time, the U.S. Treasury's Office of Foreign Assets Control designated the Prince Group as a transnational criminal organization and imposed sanctions on 146 related individuals and entities; the U.S. Financial Crimes Enforcement Network classified Huione Group as a "primary money laundering concern" under the Patriot Act, prohibiting its access to the U.S. dollar clearing system. The UK also simultaneously implemented asset freezes and travel bans on Chen Zhi and his family members.

In the context of the cryptocurrency market, this moment is highly symbolic. It is not just an enforcement action against a criminal group, but also a public demonstration of state authorities directly exercising control over on-chain assets. The 127,271 BTC—this number capable of influencing market sentiment and regulatory direction—has been written into the history of Bitcoin regulation, becoming a key marker.

From a Fujian Merchant to a Fraud Empire: Chen Zhi's Capital Structure and Industrialized Crimes

The U.S. Department of Justice's indictment revealed another face of Chen Zhi and the Prince Group.

In reports from Southeast Asian media, Chen Zhi was once considered a "newcomer in Cambodia," and the Prince Group was promoted as a multinational conglomerate with businesses spanning real estate, finance, and other fields. However, the U.S. Department of Justice accused him of operating under a "dual logic": outwardly a legitimate business empire, inwardly a financial control and settlement system serving fraud profits.

Chen Zhi originally hailed from Fujian. He made his fortune in Cambodia through the gaming and real estate industries. After obtaining Cambodian citizenship in 2014, he quickly acquired multiple development permits and financial licenses through political and business connections. Subsequently, he did not stop at local operations but built a complex transnational asset configuration through the establishment of BVI companies and Singapore holding structures, and it is suspected that he holds British identity, thereby creating barriers between different jurisdictions. In April 2024, the King of Cambodia issued a royal decree appointing Chen Zhi, the chairman of the Prince Group, as an advisor to Prince Hun Sen, the President of the Senate, indicating his deep political and business roots in the country.

King Norodom Sihamoni of Cambodia issued a royal decree on April 19, 2024, appointing Chen Zhi, the Duke and Chairman of the Prince Group, as an advisor to Prince Hun Sen, the President of the Senate.

According to the indictment, the telecom fraud system established by Chen Zhi in Cambodia was operated in a "industrialized" manner. The Department of Justice documents repeatedly mentioned the concepts of "park" and "mobile phone farm," with a highly systematic operation model:

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· Physical base: The so-called "park" is registered under the guise of service outsourcing, but actually operates under closed management.​

· Human control: Overseas laborers are attracted into the country through high salary recruitment, often suffering from restrictions on personal freedom.

· Standardized operations: Each operator manages hundreds of "relationship lines," using a unified script for social induction and investment guidance, similar to customer relationship management.​

· Technical disguise: "Mobile phone farms" use a large number of SIM cards and IP proxies to create virtual identities and locations to conceal the true source.

This is not a traditional gang of rogue operators, but a "on-chain fraud factory" with clear division of labor. All fraud funds eventually flow into the financial intermediate layer of the Prince Group. According to reports, Chen Zhi's illicit gains were used for extremely luxurious consumption, including purchasing luxury watches, yachts, private jets, and even a Picasso painting auctioned in New York.

Analysis of the two-tier business structure of Prince Group

​Fund Tracing: From Hacker Robbery to Fraud Laundering

The origin of the 127,271 BTC in this case is particularly complex. According to reports from on-chain analysis firms such as Elliptic and Arkham Intelligence, these bitcoins are highly correlated with the theft of a large mining company called "LuBian" in 2020.

Records show that in December 2020, an abnormal transfer occurred from the core wallet of LuBian, with approximately 127,426 BTC being stolen. On-chain records even left a small transaction from LuBian to the hacker address: "Please return our funds, we'll pay a reward." After that, this massive amount of funds remained dormant for a long time, until mid-2024 when they began to become active again, with their movement path overlapping with the wallets controlled by the Prince Group. (Latest update: On October 15, the LuBian-related wallets transferred all 9,757 BTC after three years of dormancy, worth $1.1 billion.)

This means that the investigation reveals not a simple "fraud-laundering" chain, but a more complex path: "Hacker robbery of a mine → long-term hiding → absorbed into a criminal organization's fund pool → attempts to wash money through mining and OTC transactions." This discovery elevates the case to a new level of complexity: it involves both hacker attacks and mining security vulnerabilities, and reveals how gray exchange networks absorb and hide large amounts of funds with abnormal sources.

How Were the Bitcoins Confiscated?

For the cryptocurrency industry, the far-reaching impact of this case goes beyond toppling a fraud boss, but rather demonstrates a complete disposal process for on-chain assets by judicial and intelligence agencies: on-chain location → financial blockade → judicial takeover. This is a practical closed-loop that seamlessly connects "on-chain tracking capabilities" with "traditional judicial power."

Step One: On-Chain Tracking — Locating the "Funds Container"

The anonymity of Bitcoin is often misunderstood. In fact, its blockchain is a public ledger, and each transaction leaves a trace. The Prince Group attempted to launder money through the classic "spray-and-funnel" model: dispersing the main wallet's funds like a spray into a large number of intermediate addresses, and then re-aggregating them into a few core addresses like a stream flowing into a river after a short stay.

This operation may seem complicated, but from the perspective of on-chain analysis, frequent "dispersion-aggregation" behavior actually creates unique graph features. Investigative agencies (such as TRM Labs and Chainalysis) use clustering algorithms to accurately map out "funds return maps," ultimately confirming that these seemingly dispersed addresses all point to the same controlling entity — the Prince Group.

Step Two: Financial Sanctions — Cutting Off the "Conversion Channel"

After identifying the on-chain assets, the U.S. authorities launched dual financial sanctions:

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· Treasury (OFAC) Sanctions: Listing Chen Zhi and related entities on the list, any institution under U.S. jurisdiction must not conduct transactions with them.​

· Financial Crimes Enforcement Network (FinCEN) §311 Provision: Designating key entities as "primary money laundering concerns," completely cutting off their access to the U.S. dollar clearing system.

At this point, although these bitcoins can still be controlled by private keys on the chain, their most important value attribute — the ability to convert into U.S. dollars — has been frozen.

Step Three: Judicial Takeover — Completing the "Ownership Transfer"

The final seizure did not rely on violently cracking private keys, but rather on legally taking over the "signing rights." Law enforcement obtained passphrases, hardware wallets, or transaction permissions based on search warrants, then initiated a legitimate transfer transaction like the original owner of the assets, transferring the Bitcoin to a government-controlled custody address.

At the moment this transaction is confirmed by the blockchain network, the "legal ownership" and "on-chain control rights" are unified. The ownership of these 127,271 BTC is officially transferred from Chen Zhi to the U.S. government, both technically and legally. This series of moves clearly indicates that "on-chain assets are untouchable" is not absolute in front of national power.

Where Will the Bitcoin Go After Seizure?

After 127,271 BTC were transferred from the wallet of the fraud empire to the "U.S. Government Controlled Wallet," a more strategically significant question emerged: the ultimate destination of this massive asset will reveal how the U.S. government positions Bitcoin — as "illicit property" to be sold, or as "strategic assets" to be held?

Historically, the way the U.S. government has handled seized digital assets has roughly fallen into several categories. In the Silk Road case, the Bitcoin was transferred to private institutional investors through public auction after the judicial procedure, such as Tim Draper, who was one of the batch of auction buyers. The BTC from the Colonial Pipeline ransom was temporarily kept in the government account after recovery, used as evidence for the case and for the Treasury's record-keeping purposes. As for FTX, it is currently still in the judicial custody phase, and the official has not yet formally confirmed that the seized assets will belong to the government. Most of the assets are theoretically intended to be used for user compensation within the creditor liquidation process, rather than directly added to the national treasury reserves.

Different from the method of handling seized Bitcoin through public auction (such as the Silk Road case), this case faces a key variable: in March 2025, the White House has signed an executive order establishing a "Strategic Bitcoin Reserve" mechanism. This means that the BTC in this case may no longer be simply auctioned, but directly converted into government-held reserve assets.

Thus, the U.S. is building an unprecedented "on-chain asset regulatory closed loop": locating targets through on-chain tracking — cutting off their fiat exit through sanctions — completing legal ownership deprivation through judicial procedures — finally transferring the assets into government control. The core of this process is not to restrict market circulation, but to redefine the legal ownership of "key control rights".

Once the judicial procedure confirms that the assets are proceeds of crime, their nature changes from "cryptocurrency under individual control" to "digital asset certificate under national jurisdiction."

With the transfer of 127,271 BTC, the United States has already become the sovereign entity holding the largest amount of Bitcoin in the world. This is not only an unprecedented confiscation action, but also heralds the beginning of an era where national power systematically controls on-chain assets.