The US Department of Justice recently revealed the seizure of 127k Bitcoins through press statements and unsealed court documents, worth over 14 billion US dollars at the time of the announcement. According to public documents, the seized funds originate from lubian.com related wallets, which we previously reported as extremely weak cryptographically. Allegedly, the Bitcoins were originally controlled by a massive criminal organization behind lubian.com that ran large-scale investment scam operations from Southeast Asia. This forfeiture represents the largest in DoJ history and made big headlines.


Billion Dollar Wallets

See research update#14 and research update#7 for previous articles on the weak wallets.

US Forfeiture

The press statement from the Department of Justice (DoJ) alleges that the seized funds originate from a massive Asian criminal operation. According to the claims, the criminal group committed investment fraud on a massive scale with the help of forced labor camps, human trafficking, violence, bribery, and money laundering.

The published statements include a lot of interesting background information, and I suggest reading the press release, court documents, or media articles to learn more about this. Be warned that some details and evidence presented on the alleged violent tactics are very graphic and intense.

The Weak Wallet Connection

The public court documents 25-CR-312 and 25-CV-05745 shared by the DoJ contain a detailed list of Bitcoin addresses that they associate with the main defendant. See for example 25-CV-05745 page 23-24, and the related analysis on page 25 and following.

The official document clearly states that the “Chen Wallets” list represents a snapshot of the situation as of December 2020 and that these wallet addresses no longer hold the funds in question, see footnote 6:

This table identifies the addresses at which the Defendant Cryptocurrency was stored as of December 2020. The addresses contained the Defendant Cryptocurrency and no other funds. As discussed below, the Defendant Cryptocurrency is now stored at addresses controlled by the government.

Astonishingly, every Bitcoin address in the published “Chen Wallets” list is also in our research update#14 list of weak wallets!

As outlined in our previous research, this is proof that the private keys of all “Chen Wallets” in the forfeiture document were generated in an extremely insecure way, allowing basically anyone to steal all associated funds at any time. More specifically, the primary 256-bit secret key was generated from 32-bit inputs to the Mersenne Twister pseudorandom number generator (PRNG) algorithm, which is a catastrophic design flaw. Given the hierarchical wallet standards involved, this flaw must have been present at the initial wallet creation through vulnerable wallet software.

Four addresses from our previous list weren’t named in the document:

Wallet Address Comments
32vpyd3jos4mEe8CmBnreRRXJJnwLMF3Gn Wallet was empty since 2019-03-07 -> nothing to take in 12/2020
36UNrMNN3xk1dTfqCWAPmrfBXA2gykCPBK Wallet was partially emptied 2020-12-28, but kept some funds until 2020-12-29? Overlooked by new actor?
3Jx6enuiaBi1tk1KJsx6LzAeVgiMcjx7NZ Address only used later in 2024-01-17, small amounts -> not relevant to 12/2020
3PQzDoiwW7pYh49MotPrVcsydQCq5ES1Bz Wallet was almost empty since 2020-02-22 -> only minor sum moved in 12/2020

More Research on Twitter

Several well-known crypto sleuths have dug into the different aspects of this story, and in some cases quoted and referenced corresponding Milk Sad articles and public research data. It’s great that our work is useful to other researchers, and we appreciate the attributions and credits for it!

Here are some quick references, which we don’t vouch for but could be interesting to readers: @tayvano_: thread on timeline and potential events, thread with research on wallet clusters

@ZachXBT: connection to weak wallets

Research Note

A quick reminder that we have no involvement with the funds’ former and current owners or any withdrawal of funds in this range. The Bitcoins in question were moved years before we as the Milk Sad team looked into this topic, or reported anything about it. We were not involved in the forfeiture. As researchers, we’re mainly trying to shine a light at what happened, hoping to help avoid future disasters through more public awareness of the dangerous software flaws that caused them.

If other researchers want to get in touch, let us know!