China's top cybersecurity agency has made explosive claims against the United States, accusing American authorities of conducting a massive Bitcoin theft through sophisticated hacking operations.
The allegations center around 127,272 bitcoins worth approximately $13 billion that were stolen from a Chinese mining pool in 2020.
The LuBian Mining Pool Breach
On December 29, 2020, the LuBian mining pool suffered what would become one of the largest cryptocurrency thefts in history. Hackers stole 127,272 bitcoins, worth about $3.5 billion at the time. The mining pool was owned by Chen Zhi, chairman of Cambodia’s Prince Group, who is now under US indictment for running massive fraud operations.
The hack exploited a critical weakness in how the mining pool generated private keys for Bitcoin wallets. LuBian had controlled about 6% of global Bitcoin hash rate when the breach occurred. The system used a flawed random number generator called Mersenne Twister with only a 32-bit seed, making it vulnerable to brute-force attacks. This technical flaw allowed attackers to predict the private keys and drain the wallets.
After the theft, Chen Zhi and his company desperately tried to contact the hackers. They sent over 1,500 messages through Bitcoin transactions, spending about 1.4 bitcoins to plead for the return of their stolen funds. They offered rewards and ransom payments, but the hackers never responded.
Four Years of Silence
What makes this case unusual is what happened next – nothing. The stolen bitcoins sat completely still in the hackers’ wallets for nearly four years. This dormancy period is what Chinese authorities point to as evidence of state-level involvement.
Most criminal hackers quickly convert stolen cryptocurrency into cash to avoid detection. The fact that these massive holdings remained untouched suggests a different type of operation, according to China’s National Computer Virus Emergency Response Center (CVERC).
In July 2024, the dormant bitcoins suddenly began moving. On July 5, 2024, blockchain tracking firm Arkham Intelligence recorded a massive transfer of 120,576 BTC from addresses labeled “LuBian.com Hacker” to wallets identified as US government-controlled. This movement triggered the current diplomatic dispute between the two nations.
China’s Explosive Allegations
CVERC released a technical report in November 2024 accusing the US government of orchestrating the original 2020 hack. The agency claims American intelligence agencies used “state-level hacking organization” capabilities to steal the bitcoins, then waited years before officially seizing them through legal channels.
Chinese investigators argue that the four-year dormancy period proves the hack was not conducted by typical criminals seeking quick profits. Instead, they believe it was a coordinated operation by US authorities who planned to eventually claim the funds through legal seizure.
The timing of the US seizure announcement in October 2024 – just months after the bitcoins moved to government wallets – has raised questions about how American authorities gained access to the funds.
US Government’s Position
The US Department of Justice tells a different story. They filed a civil forfeiture complaint for 127,271 bitcoins, claiming they are proceeds from Chen Zhi’s criminal enterprise, which operated forced labor camps in Cambodia for cryptocurrency fraud schemes.
According to US prosecutors, Chen Zhi’s Prince Group ran “pig butchering” scams that stole billions from victims worldwide. These operations used trafficked workers forced to conduct online romance and investment scams, ultimately convincing victims to send cryptocurrency that was never returned.
The DOJ describes the $15 billion seizure as the largest forfeiture action in US history, targeting the criminal proceeds of an international fraud network. They maintain the seizure was a legitimate law enforcement operation, not a state-sponsored hack.
Technical Evidence and Expert Analysis
Independent blockchain researchers have found no direct evidence supporting China’s claims of US government hacking. Companies like Elliptic and TRM Labs have traced the movement of funds but stop short of attributing the original 2020 hack to any specific state actor.
The technical vulnerability that enabled the hack – weak random number generation in Bitcoin wallet creation – has been documented in similar cases. The same type of flaw affected other cryptocurrency services between 2022 and 2023, resulting in hundreds of additional Bitcoin thefts.
However, researchers acknowledge limitations in determining who actually executed the 2020 operation. While the technical methods are clear, identifying the attackers remains difficult based solely on blockchain evidence.
Global Implications for Digital Assets
This dispute highlights growing tensions between major powers over cryptocurrency oversight and digital asset sovereignty. The US currently holds approximately 326,588 bitcoins worth over $34.2 billion, making it one of the largest government holders of the cryptocurrency.
The allegations could impact how countries approach cryptocurrency law enforcement and international cooperation on digital asset crimes. Trust between nations on cybersecurity matters may be affected if such accusations continue without resolution.
Market analysts warn that uncertainty around large government-held Bitcoin could create volatility, especially if political tensions lead to unexpected movements of these substantial holdings.
Digital Diplomacy Gone Wrong
The China-US Bitcoin dispute represents a new frontier in international relations, where digital assets become tools of geopolitical conflict. Whether this case involves legitimate law enforcement or state-sponsored theft may never be definitively proven, but it demonstrates how cryptocurrency’s borderless nature creates complex jurisdictional challenges.
The truth likely lies somewhere between the competing narratives, highlighting the need for better international frameworks governing digital asset enforcement and cross-border cryptocurrency investigations.
