The Largest Crypto Forfeiture in U.S. History
In a dramatic turn of events, the U.S. Department of Justice unsealed an indictment on October 14, 2025, charging Prince Holding Group founder Chen Zhi with wire fraud and money laundering conspiracy, while announcing the seizure of approximately 127,271 Bitcoin worth $15 billion—marking the largest cryptocurrency forfeiture action in DOJ history.
Less than 24 hours later, a wallet linked to the Chinese-Iranian mining operation LuBian transferred 11,886 BTC valued at approximately $1.3 billion after three years of dormancy, raising immediate questions about timing, coincidence, and custody.
The LuBian Wallet Movement: What Happened
Breaking Three Years of Silence
On Wednesday, October 15, 2025, blockchain analytics firm Lookonchain flagged that a wallet linked to LuBian transferred 9,757 BTC (worth about $1.1 billion) to new wallets. Hours later, another 2,129 BTC worth about $238 million moved, totaling 11,886 Bitcoin worth approximately $1.3 billion.
The transfers occurred in two waves:
- First transfer: 9,757 BTC (~$1.1 billion) to addresses “34kn9z…s9tef” and “bc1q4c…77s0”
- Second transfer: 2,129 BTC (~$238 million) hours after the initial move
The Recovery Wallet Theory
Arkham Intelligence previously reported in August 2025 that LuBian had been hacked for 127,426 BTC in 2020 (worth about $3.5 billion at the time), noting that 11,886 BTC had been moved to recovery wallets—the exact amount that just became active this week.
Chen Zhi and the Prince Holding Group
The DOJ indictment reveals that Chen Zhi, chairman of Prince Group, allegedly operated forced-labor scam compounds across Cambodia, using online cryptocurrency mining operations to launder proceeds from investment scams, online extortion, and forced labor.
According to the DOJ’s forfeiture complaint, the Prince Holding Group is allegedly part of a network that transferred suspicious proceeds into cryptocurrencies, with funds linked to mining operations and illicit financial flows.
LuBian Mining Operations
With operations in China and Iran, LuBian controlled almost 6% of global Bitcoin mining before disappearing in February 2021. The mining pool was one of Chen’s businesses used to produce “clean” Bitcoin dissociated from criminal proceeds.
Cryptographic Vulnerability
The theft appears to have happened due to a weakness in the algorithm LuBian used to generate its cryptographic keys, which was susceptible to brute-force attacks. In the days following the hack, LuBian spent over $40,000 sending hundreds of transactions to the hacker’s wallets containing the embedded message: “Please return our funds, we’ll pay a reward”.
The Custody Question
The DOJ states that these bitcoins are now in their custody, though it remains unclear how the bitcoins came to be in US custody or who “stole” them from Chen/LuBian, or whether a theft really took place. Elliptic analysis suggests movements in June and July 2024 may represent bitcoins moving into wallets controlled by U.S. authorities.
Blockchain Analytics: Tracking the Money
Lookonchain and Arkham Intelligence
Two key blockchain analytics firms played crucial roles in tracking these movements:
- Lookonchain: Documented the sequence of transfers, tracing funds routed through multiple addresses and transit checkpoints across the blockchain
- Arkham Intelligence: Mapped addresses exhibiting unusual activity and linked them to monitored entities, highlighting movements that coincide with volumes recovered in public analyses
The on-chain data shows significant transfers to addresses that analysts link to infrastructures already under observation, with tracking indicating two waves of movements totaling 11,886 BTC.
Market and Regulatory Impact
U.S. Bitcoin Holdings Surge
If the forfeiture is approved, U.S. government Bitcoin holdings could reach approximately 324,625 BTC worth roughly $36 billion—a massive addition that could be sold, retained as part of the strategic Bitcoin reserve, or managed through existing asset disposal channels.
Strategic Bitcoin Reserve Context
The case aligns with a broader U.S. strategy to formalize digital asset reserves under a strategic Bitcoin holding framework established earlier this year by executive order. Senator Cynthia Lummis commented that a Strategic Bitcoin Reserve could “secure our debt with a hard asset” and “use it in 20+ years to retire a meaningful % of US debt.”
Minimal Market Disruption
Market observers said the broader crypto price environment showed minimal disruption despite the magnitude of the filing, with major exchanges reporting stable liquidity levels and on-chain data suggesting limited spillover effects.
Regulatory Implications
Increased KYC/AML Scrutiny
The case signals intensified focus on:
- Know Your Customer (KYC) compliance for crypto exchanges
- Anti-Money Laundering (AML) protocols
- Monitoring of dormant wallet activities
- Crypto mining money laundering schemes
- Cross-border cryptocurrency flows
International Coordination
The case involved coordination with the National Security Division, U.S. Department of the Treasury, FinCEN, OFAC, and international partners including the UK’s Foreign, Commonwealth, and Development Office, resulting in blanket sanctions against 146 individuals and companies tied to Prince Group.
What’s Next: Key Developments to Watch
Legal Proceedings
- DOJ Legal Strategy: Next steps in the forfeiture case filed in Eastern District of New York
- Chen Zhi’s Defense: Legal challenges and responses from the defendant
- Prince Group Actions: Statements or legal maneuvers from implicated entities
- Court Verification: Charges are subject to legal dispute and will be verified in court
Exchange and Custodian Actions
Exchanges may proactively block or freeze accounts linked to the investigation, potentially disrupting fund flows and complicating the situation further.
Blockchain Forensics Evolution
The case demonstrates that traditional investigations and blockchain analysis are increasingly interconnected, setting new standards for crypto-related law enforcement.
Critical Caveats and Uncertainties
Attribution Limitations
- On-chain correlation does not necessarily equate to criminal liability
- Definitive ownership of certain addresses and chain of beneficiaries not yet fully verified
- The term “hack” used cautiously—authorities speak of connections and transfers, not always confirmed theft
- Some points remain pending judicial confirmation or additional documentation
Legal Process Required
Currently, all charges are subject to legal dispute and require documentary and accounting evidence. The crypto mining money laundering hypothesis needs court verification.
Investor Implications
Due Diligence Essentials
- Evaluate transparency of asset flows before exposure
- Consider regulatory risks associated with large concentrated holdings
- Monitor exchange communications and potential account freezes
- Assess origin of assets in portfolios
- Review compliance with KYC/AML requirements
Risk Management
Asset managers are reviewing concentrated exposures, exchanges must strengthen controls and reporting, and retail traders should consider asset origins before investment.
Key Takeaways
- $15 billion forfeiture represents largest DOJ crypto seizure in history
- 11,886 BTC moved worth $1.3 billion just 24 hours after DOJ announcement
- 127,271 BTC total linked to alleged Prince Group criminal network
- U.S. holdings could reach 324,625 BTC worth $36 billion if forfeiture approved
- 2020 “hack” involved cryptographic vulnerability worth $3.5 billion at the time
- International coordination with 146 individuals and companies sanctioned
- Minimal market impact despite massive seizure announcement
The Bigger Picture
This case represents a watershed moment in cryptocurrency law enforcement, demonstrating that:
- Blockchain transparency enables unprecedented forensic capabilities
- International cooperation can effectively trace crypto-related crimes
- Even sophisticated mining operations can’t fully obscure illicit fund flows
- U.S. government is building massive Bitcoin reserves through seizures
- The line between legitimate mining and money laundering is under intense scrutiny
For investors and industry participants, the lesson is clear: beyond seeking returns, evaluate the transparency of flows and the regulatory risk associated with large concentrations of digital assets. The crypto industry’s maturation includes accepting greater law enforcement oversight and accountability.
