I just came across a case that really shook me. Last month, the U.S. Department of Justice announced the seizure of 127,000 bitcoins from Chen Zhi, the founder of the Cambodian Prince Group. Based on today’s prices, that comes to roughly more than $10 billion. This wasn’t some hacker attack or a technical break-in. It was carried out through social engineering phishing combined with judicial cooperation.

First, let’s talk about Chen Zhi himself. His identity is fairly complex. He has dual citizenship in the UK and Cambodia, and he was once an adviser to Cambodia’s former prime minister. On the surface, he presents himself under the banner of real estate, gambling, and financial services. In reality, across Cambodia he operates at least ten scam compounds. Their playbook is to lure global laborers into the country with high-paying recruitment, confiscate their IDs, commit violence, and force them to carry out “pig-butchering” scams. The 2020 Bitcoin bull market became the turning point that helped him upgrade his criminal operation.

Chen Zhi recognized that Bitcoin’s cross-border transferability and its pseudo-anonymity perfectly fit money-laundering needs, so he built a standardized “scam-to-laundering” pipeline. The front end—“mobile farms” made up of 76,000 social accounts—handled phishing. The mid end received funds through fake investment platforms. The back end used professional teams to clean the transactions on-chain. With just two outposts, they were equipped with 1,250 phones, generating illegal proceeds of $30 million per day. Most of it was eventually settled into Bitcoin.

How did the United States find him? In June 2024, a retired teacher in Florida filed a report, saying that he was tricked out of $470,000 in retirement money by a “Chinese girlfriend.” The FBI tracked the funds and found they had gone into the Prince Group’s wallets. This wasn’t a one-off case—between 2023 and 2024, at least 259 U.S. citizens were scammed by the same network, losing more than $18 million. Under the U.S. anti–computer fraud law and the “long-arm jurisdiction” principle, as long as the crime harms U.S. citizens, the U.S. Department of Justice has authority to take the case.

What’s truly interesting is how law enforcement broke through. They didn’t try to crack Bitcoin’s cryptography—which would require attempting 2^256 possible combinations and, with today’s computing power, would take hundreds of millions of years. Instead, they focused on “people.” With help from Interpol, FBI agents infiltrated Cambodia’s high-end social circle in Phnom Penh under the guise of a financial analyst. Three months later, they confirmed that someone called “Jinzi” was the key person who held the encryption key.

To maintain absolute control, Chen Zhi split the mnemonic phrase for cold wallets into three parts for safekeeping—seemingly a tight “separation of powers,” but in truth it was built on absolute trust in human nature. The FBI saw that point clearly. They sent “Jinzi” two videos: one was a news report showing a scam victim jumping to death; the other showed intimate scenes between Chen Zhi and other women. The videos were accompanied by anonymous letters hinting that they had already obtained evidence of her involvement in money laundering, and they proposed that they could provide U.S. witness protection, legalize her identity, and offer a $1,000,000 compensation.

At first, “Jinzi” was highly cautious. So the FBI set up a temporary communications node on the dark web, where officials from the Department of Justice appeared on camera to record videos showing the court protection orders and the compensation agreement. They also arranged for a former member of an anti-fraud group (who had already entered the U.S. witness protection program) and an anonymous call with her to share what life was like after her identity was changed. This kind of “peer endorsement” ultimately shattered her psychological defenses.

She provided three key pieces of information: the paper mnemonic phrase was hidden in a floor secret compartment in the study room of a villa in Phnom Penh; the hardware wallets were stored in a safe deposit box in Hong Kong; and unlocking required Chen Zhi’s fingerprint and the combination code of his birthday. Using the access obtained through “Jinzi,” U.S. law enforcement gained remote Bluetooth pairing permissions to extract the public keys from the hardware wallet. At the same time, they applied to Hong Kong courts for an emergency freezing and seizure order to seize the safe deposit box.

Technical control alone wasn’t enough. To legally transfer the assets, a complete legal process was required. The U.S. Department of Justice initiated a civil forfeiture proceeding—only needing to prove that the assets were “more likely than not related to criminal activity” to apply for seizure, which is far simpler than a criminal conviction. The on-chain reports became key evidence, showing 372 cross-wallet transfers of the scam funds to Chen Zhi’s wallets, a map of where the stolen assets from LuBian went, and behavioral analysis of the “spray-and-funnel” money-laundering pattern. On October 8, 2025, the U.S. District Court for the Eastern District of New York issued an order to seize assets.

At the same time, the U.S. Department of the Treasury’s Office of Foreign Assets Control put Chen Zhi and 146 related entities on the sanctions list. The UK froze his 19 properties in London (worth £130 million). The U.S. Financial Crimes Enforcement Network, based on the Patriot Act, listed Huichong Payment under the Prince Group as a “primary money-laundering concern,” cutting off its access to the U.S. dollar clearing system. This means that even if there are other hidden assets, they cannot be converted into fiat currency.

So what is the most profound lesson of this case? It’s not technical failure—it’s human failure. Bitcoin’s cryptographic security can’t withstand the weaknesses of human nature. Chen Zhi’s cold wallet used top-tier industry configurations, yet it collapsed because he over-relied on the moral bottom line of a single trusted insider. As FBI agents said after the fact, “We never tried to break the algorithm. We just found the cracks in the human heart that safeguards the algorithm.”

Another lesson is that on-chain transparency has become the “mirror” that reveals criminal wrongdoing. Chen Zhi’s team thought that spreading out transfers and using mixing services could hide the trail, but they overlooked the public, traceable nature of the blockchain. Tracking technologies like Chainalysis can accurately identify the movement of criminal funds through features such as transaction frequency, amount distribution, and address relationships. Even after more than a dozen transfers, they can still reconstruct the full picture. In 2024, the number of cryptocurrency crime cases cracked through on-chain analysis worldwide increased by 187%.

More importantly, the United States’ capabilities in cryptocurrency law enforcement have already taken shape. To date, the U.S. has seized more than 320,000 bitcoins through enforcement actions, approaching about one-third of its “strategic reserve” target. Cooperation with the UK and the EU is also building a global cryptocurrency regulatory network.

Honestly, this case serves as a wake-up call for everyone participating in crypto. The creed “whoever controls the private keys controls the assets” is simply no match for the machinery of the state and social engineering. Real asset security isn’t about absolute technical perfection, nor about hiding to the utmost degree. It lies in respect for rules and strict adherence to compliance. For someone like Chen Zhi, who tried to use cryptocurrencies to evade regulation, the outcome is already clear: the blockchain is not a safe haven for criminals. No matter where they hide, the digital footprints on-chain will ultimately point to the truth. And for ordinary investors, this also reminds us that the value of cryptocurrencies is not a tool for speculation, but a carrier of technological innovation. Only when used within a compliant framework can assets truly be secured.