DOJ Seizes $3.6 Billion Worth of Allegedly Stolen Bitcoin
Posted on 02/08/2022
The U.S. Justice Department (DOJ) had seized more than US$ 3.6 billion in bitcoin allegedly stolen as part of a 2016 hack of Bitfinex, saying authorities have also arrested a husband and wife in New York for allegedly trying to launder the cryptocurrency fortune. Bitfinex is a virtual currency exchange presently valued at approximately US$ 4.5 billion.
Ilya Lichtenstein, 34, and his wife, Heather Morgan, 31, both of New York, New York, are scheduled to make their initial appearances in federal court today at 3:00 p.m. in Manhattan. According to court documents, Lichtenstein and Morgan allegedly conspired to launder the proceeds of 119,754 bitcoin that were stolen from Bitfinex’s platform after a hacker breached Bitfinex’s systems and initiated more than 2,000 unauthorized transactions. Lichtenstein is a tech entrepreneur who goes by the nickname “Dutch” and holds both U.S. and Russian citizenship. Those unauthorized transactions sent the stolen bitcoin to a digital wallet under Lichtenstein’s control. At the time of the theft, that amount of bitcoin was worth around US$ 71 million. Over the last five years, approximately 25,000 of those stolen bitcoin were transferred out of Lichtenstein’s wallet via a complicated money laundering process that ended with some of the stolen funds being deposited into financial accounts controlled by Lichtenstein and Morgan. The remainder of the stolen funds, comprising more than 94,000 bitcoin, remained in the wallet used to receive and store the illegal proceeds from the hack. After the execution of court-authorized search warrants of online accounts controlled by Lichtenstein and Morgan, special agents obtained access to files within an online account controlled by Lichtenstein. Those files contained the private keys required to access the digital wallet that directly received the funds stolen from Bitfinex, and allowed special agents to lawfully seize and recover more than 94,000 bitcoin that had been stolen from Bitfinex. The AlphaBay accounts were used as a pass-through for the stolen BTC. The federal officers followed the money from Alphabay to a crypto account in Lichtenstein’s name. The recovered bitcoin was valued at over $3.6 billion at the time of seizure. Chain-hopping is a money laundering technique involving converting one form of virtual currency to another, making the transaction paths more difficult to track.
The DOJ release states, “the criminal complaint alleges that Lichtenstein and Morgan employed numerous sophisticated laundering techniques, including using fictitious identities to set up online accounts; utilizing computer programs to automate transactions, a laundering technique that allows for many transactions to take place in a short period of time; depositing the stolen funds into accounts at a variety of virtual currency exchanges and darknet markets and then withdrawing the funds, which obfuscates the trail of the transaction history by breaking up the fund flow; converting bitcoin to other forms of virtual currency, including anonymity-enhanced virtual currency (AEC), in a practice known as “chain hopping”; and using U.S.-based business accounts to legitimize their banking activity.”
An affidavit filed by an IRS agent against the couple alleges that they spent only a small fraction of the stolen money, some of it on gold and some on non-fungible tokens, or NFTs.
Lichtenstein and Morgan are charged with conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison, and conspiracy to defraud the United States, which carries a maximum sentence of five years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors. The investigation was led by IRS-CI Washington, D.C. Field Office’s Cyber Crimes Unit, the FBI’s Chicago Field Office, and HSI-New York. The Ansbach Police Department in Germany provided assistance during this investigation.
Heather Morgan’s recent Instagram post
“We have been cooperating extensively with the DOJ since its investigation began and will continue to do so,” Bitfinex said in a written statement. The company pledged to “follow appropriate legal processes to establish our rights to a return of the stolen bitcoin.”
