120,000 Bitcoins Hijacked? Web3 Lawyers Provide In-Depth Analysis of the Regulatory Dilemmas Behind the "Prince Group" Case

Amidst tightening global regulations on crypto assets, a "chain chase" spanning Cambodia and the US and UK has captured everyone's attention. In October 2025, the US Treasury and Justice Departments launched the largest-ever crypto finance enforcement action against Cambodia's Prince Group, freezing over 120,000 bitcoins.

(The image above is from CNBC.)

This case has not only shaken the blockchain industry but also challenged our traditional understanding of "financial sovereignty": When digital assets cross borders and flow anonymously, how can sovereign states track them technologically, sanction them legally, and regain the initiative in enforcement? When the United States can use financial networks as an extension of its law enforcement reach, how should we establish our own system for the recovery and judicial disposal of digital assets?

This article will delve into the legal logic and international regulatory dilemmas behind the "Prince Group" case from four perspectives: case review, legal basis, technical loopholes, and regulatory implications. It will also attempt to answer an increasingly pressing question: In the era of digital finance, who truly holds the sovereignty of law enforcement?

I. Case Review

First, let's try to reconstruct the specific details of the Prince Group case as much as possible in order to analyze its significance.

In October 2025, the U.S. Treasury Department (OFAC) launched one of the largest single judicial crackdowns in history against the "Prince Group" transnational criminal organization, sanctioning 146 members. Subsequently, the U.S. Department of Justice (DOJ) released an indictment accusing Chen Zhi of organizing and operating a "pig butchering" type of cryptocurrency investment scam based in forced labor parks, as well as conspiracy to commit wire fraud and money laundering. Most surprisingly, the DOJ claimed to have seized over 127,000 bitcoins.

(The image above is taken from the U.S. Department of Justice website)

How exactly did the Prince Group manage to swindle these enormous sums of Bitcoin? It's actually quite simple. According to the indictment, Chen Zhi led the Prince Group in a large-scale online investment fraud, luring victims to invest in US dollars or cryptocurrencies. The platforms presented to users displayed account balances or showing increasing returns, but in reality, these assets had already been transferred out and centrally deposited into wallets controlled by Chen Zhi. Simultaneously, the Prince Group invested in or leased real mining companies such as LuBian Mining and purchased computing power from the open market, making it appear as if they were acquiring Bitcoin through mining, thus giving it the appearance of "legal generation."

Regarding this massive cryptocurrency scam, reports indicate that China established a special task force in Beijing to investigate the case as early as five years ago. However, due to the passage of time, we have been unable to find any official information or news reports, only revelations from various media outlets, making it impossible to definitively confirm their veracity. But how did the United States manage to gain control of such a large amount of Bitcoin, and how did it extend its law enforcement reach to Cambodia in the far east?

1. The source of U.S. jurisdiction

The indictment explicitly states that the Prince Group's fraud network included victims worldwide, including in the United States, with one local network operating in Brooklyn, New York. Victims were tricked into transferring funds to shell company accounts in Brooklyn and Queens, which were then transferred back to accounts controlled by the Prince Group and Chen Zhi through international wire transfers or cryptocurrency transactions. In other words, these accounts were opened and liquidated through US financial institutions. According to the US Constitution, territorial jurisdiction is established wherever any part of a criminal act occurs or has consequences in the United States. The indictment also explicitly states that because the acts and consequences occurred in this region, this case falls under the jurisdiction of the United States District Court for the Eastern District of New York.

(The image above is taken from the original indictment)

2. Why was it able to be executed smoothly?

At the criminal level, U.S. judicial authorities, under the Criminal Asset Forfeiture Act (18 USC §§ 981, 982), issued a seizure order for 127,271 bitcoins and other proceeds of crime controlled by Chen Zhi. At the financial sanctions level, the U.S. Treasury Department, under Section 311 of the Patriot Act (31 USC § 5318A), designated Prince Group and its affiliated financial network as a "Primary Money Laundering Concern," gaining immediate access to freeze its accounts and transactions related to the U.S. financial system. Combined with the Global Magnitsky Human Rights Accountability Act (22 USC § 2656), global asset freezes and transaction bans can be imposed on foreign individuals involved in serious human rights violations or significant corruption.

Combined with Rule 41 of the Rules of Criminal Procedure and the Multilateral Treaty on Mutual Legal Assistance (MLAT) mechanism, the United States was able to successfully implement seizure, arrest warrant, and asset disposal measures through blockchain escrow nodes, exchanges, and multilateral cooperation.

3. Mysteries surrounding technical vulnerabilities

Why is the US able to easily freeze Bitcoin storage? Besides the powerful on-chain teams behind the US, CryptoSalad also heard an interesting explanation from Elliptic Blog, a well-known blockchain forensics and compliance technology organization, which I'd like to share with you:

In late 2020, a serious security incident occurred at a mining company called LuBian Mining (yes, the one mentioned earlier). In short, the algorithm for generating the private key to open the Bitcoin vault contained a random number vulnerability (also known as "Milk Sad"), allowing attackers to crack the private key and transfer all the Bitcoin in its mining pool—reportedly exactly 127,000 coins. From June to July 2024, new activity emerged with these Bitcoins, and the wallets involved overlapped with or merged with wallets controlled by Prince Group Network and Chen Zhi. Finally, in 2025, the U.S. Department of Justice officially seized the Bitcoins.

4. Undoubtedly, a significant portion of the 120,000 bitcoins frozen by the Prince Group originated from funds "contributed" by the Chinese community. However, under the current legal and technological landscape, we are virtually unable to recover our rightful interests. Regardless of whether the government has launched an investigation or taken action, the Prince Group case serves as a wake-up call: in the digital finance era, financial sovereignty is not only reflected in currency issuance but also in the effective exercise of law enforcement sovereignty. When transnational crimes are uncovered, we must possess clear legal grounds, a mature technological system, and resolute law enforcement capabilities to truly protect and recover assets that rightfully belong to us.

II. Conclusion

The "Prince Group" case is neither the first nor the last of its kind. It serves as a stark reminder that finding a new balance between "strict risk control" and "maintaining sovereignty" is crucial when dealing with digital assets. Crypto Law believes that establishing an independent and controllable judicial system for the disposal of digital assets, ensuring that my country's legal dignity and enforcement capabilities extend into the digital space, is an urgent issue. Only in this way can we truly achieve "recovering stolen assets according to law" in the future, thus completing the final closed loop of law enforcement and effectively safeguarding the property security of the people.

This article represents the author's personal views only and does not constitute legal advice or opinion on any specific matter.