Assuming the IRS-CI folks actually took custody of the BTC, How in THE HELL did Zhong justify storing ~50k BTC in a way so insecure that this could even happen? Maybe they only have the addresses, and the private keys are somehow secure (like maybe a simple BIP39 passphrase???).
I am all for keeping your setup simple so you don't lose the coins via complication. But there is either more to this story, or our dear "Loaded" was incredibly ill prepared.
Reading through the court document it sounds like the feds just knocked on his door and said "Give us your Bitcoins." And he said "OK." He was also ill-prepared.
But what's curious is how did nobody here know the coins had come from Silk Road? He found an exploit in the SR withdrawal system, stole 50,000 BTC, and then showed up here like 2 months later, and said, "check me out, I'm a whale." Given blockchain forensics were a bit more archaic back then.
PS. Wonder if our little dump has anything to do with this? Nah, right?
I think it has more to do with the rumors of FTX being insolvent.