Bitcoin $13 billion theft! Bloomberg: China accuses the U.S. of orchestrating a state-sponsored hacking operation

According to Bloomberg, Chinese cybersecurity agencies accuse the U.S. government of orchestrating a $13 billion Bitcoin theft. In December 2020, the LuBian Bitcoin mining pool in China was hacked, losing over 120,000 Bitcoins. On-chain organizations recognized this as one of the largest cryptocurrency thefts in history in August. China’s National Cybersecurity Emergency Response Center described the incident as a “state-level hacking operation,” likely led by the United States.

Complete Timeline of the Largest Bitcoin Theft in History

(Source: X)

The LuBian Bitcoin mining pool was launched in April 2020 and quickly grew to become the sixth-largest Bitcoin mining pool. According to Arkham data, the network was shut down after a hacker attack that looted most of its assets. The theft in December 2020 involved over 120,000 Bitcoins, valued at approximately $13 billion at current prices. Even at the end of 2020, when Bitcoin was around $29,000, the loss was about $3.5 billion.

This Bitcoin theft is extremely rare in cryptocurrency history. For comparison, the Mt. Gox exchange was hacked in 2014, losing about 850,000 Bitcoins, and another exchange was hacked in 2016, losing about 120,000 Bitcoins. The scale of the LuBian case is comparable to those at the time, but due to the significant increase in Bitcoin prices over the years, its current valuation far exceeds any single past theft.

The Chinese Cybersecurity Emergency Response Center’s accusations carry high political sensitivity. They claim that the “silent and delayed transfer” of stolen Bitcoins indicates government involvement rather than typical criminal activity. This analysis is based on on-chain data: typical hackers, after stealing crypto assets, usually quickly launder and cash out through mixers, decentralized exchanges, or OTC trades. However, the transfer pattern in the LuBian case shows high patience and professionalism, with funds dispersed across multiple addresses and only moving after a long period of silence.

Bloomberg reports that China first released a report linking the U.S. to the LuBian Bitcoin theft last week. The timing is significant, coinciding with escalating tensions between China and the U.S. in trade, technology, and geopolitics. Attributing the theft to the U.S. government is undoubtedly a counterattack in the information war.

Connection Between the Chen Zhi Case and the Stolen Bitcoins

Chinese authorities claim that the stolen Bitcoins are related to tokens seized in the case against Chinese citizen Chen Zhi. Chen Zhi faces charges of telecom fraud and money laundering, adding a complex layer to the event. Chinese media report that “the U.S. government may have used hacking techniques as early as 2020 to steal the 127,000 Bitcoins held by Chen Zhi,” describing it as a “state-level hacker organization’s typical ‘black eats black’ operation.”

The phrase “black eats black” suggests a complex narrative: Chen Zhi may have obtained these Bitcoins through illegal means like telecom scams, and the U.S. government allegedly used hacking to re-steal these already illicit assets. This storyline attempts to portray the U.S. government as an unscrupulous actor, resorting to illegal methods even when dealing with criminal assets.

However, there are multiple doubts about this narrative. First, if Chen Zhi is involved in telecom fraud and money laundering, the Bitcoins he holds are criminal proceeds and should be frozen and confiscated through legal judicial procedures, not hacked. Second, as a legitimate mining pool, why would LuBian hold Bitcoins related to criminals? Mining pools typically coordinate hashing power and distribute rewards; they should not serve as repositories for illegal assets.

Three Major Doubts About the LuBian Bitcoin Theft

(Source: Arkham)

Unclear link between the mining pool and criminal assets: Why would a legitimate mining pool hold 120,000 Bitcoins related to Chen Zhi’s case?

Professional transfer pattern: Silent and delayed transfers indicate high organization, inconsistent with typical hacker behavior.

Unclear motive for the U.S. government: If it was law enforcement, why not pursue judicial assistance instead of hacking?

From a technical perspective, tracking the flow of these 120,000 Bitcoins is feasible. The Bitcoin blockchain is transparent, with all transactions recorded on-chain. Companies like Arkham Intelligence have developed sophisticated tools to trace fund flows and identify relationships between addresses. If China’s accusations are true, on-chain evidence should be available showing the stolen Bitcoins ultimately flowing to addresses controlled by the U.S. government.

Deep Geopolitical and Cryptocurrency Interplay

This Bitcoin theft accusation highlights the increasing role of cryptocurrencies in geopolitical conflicts. Traditionally, asset disputes between nations involved gold, foreign exchange reserves, or strategic resources. Now, a $13 billion Bitcoin becomes a new battleground for major powers, marking that digital assets have entered the core of national security and diplomacy agendas.

In recent years, the U.S. government has indeed seized large amounts of cryptocurrency through law enforcement actions. In 2022, the U.S. Department of Justice recovered about $3.6 billion worth of Bitcoin related to the 2016 exchange hack. These seizures are typically conducted through legal channels, including international cooperation, search warrants, and court orders. If the U.S. truly hacked LuBian’s Bitcoins, it would violate international law and its own legal frameworks.

However, in the realm of national security and intelligence, gray areas persist. Agencies like the NSA and CIA possess powerful cyberattack capabilities and have been exposed for infiltrating foreign targets. If LuBian mining pool is linked to the Chinese government or military, it’s conceivable that U.S. intelligence agencies might consider it a legitimate cyber target.

From a market perspective, these allegations could temporarily shake investor confidence regarding asset security. If even major mining pools are vulnerable to state-level hacking, how can individual investors and corporations safeguard their assets? Such concerns might drive more capital into regions and platforms with stricter regulation and safer custody solutions.