Two individuals were arrested earlier this February in New York City for an alleged conspiracy to launder cryptocurrency — presently valued at approximately $4.5 billion — that was stolen during the 2016 hack of virtual currency exchange Bitfinex.
So far, law enforcement has seized over $3.6 billion in cryptocurrency linked to that hack.
Lisa O. Monaco, United States Deputy Attorney General, said in a statement the arrests and the Department of Justice’s largest financial seizure ever, show that cryptocurrency is not a safe haven for criminals.
“In a futile effort to maintain digital anonymity, the defendants laundered stolen funds through a labyrinth of cryptocurrency transactions,” said Monaco.” Thanks to the meticulous work of law enforcement, the department once again showed how it can and will follow the money, no matter what form it takes.”
According to court documents, 34-year-old Ilya Lichtenstein and his 31-year-old wife Heather Morgan — both of New York City — 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 unauthorised transactions.
Those transactions sent the stolen bitcoin to a digital wallet under Lichtenstein’s control. Over the last five years, about 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.
Armed with 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 seize and recover more than 94,000 bitcoin that had been stolen from Bitfinex. The recovered bitcoin was valued at over $3.6 billion at the time of seizure.
The criminal complaint alleges that Lichtenstein and Morgan used numerous sophisticated laundering techniques, including — among others — using fictitious identities to set up online accounts; using computer programs to automate transactions; depositing the stolen funds into accounts at a variety of virtual currency exchanges and darknet markets and then withdrawing the funds.
“Criminals always leave tracks, and [this] case is a reminder that the FBI has the tools to follow the digital trail, wherever it may lead,” said FBI Deputy Director Paul M. Abbate.
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.