Bitfinex Hack: NYC Couple’s Guilty in $3.6B Case
Couple Pleads Guilty to Laundering $3.6 Billion in Stolen Bitcoin from Bitfinex Hack
In a significant legal development, a married couple from New York City has formally pleaded guilty to charges of money laundering linked to the notorious 2016 hack of the cryptocurrency exchange Bitfinex. This hack led to the illegal acquisition of approximately 120,000 bitcoins.
Turning Point: Guilty Pleas of Ilya Lichtenstein and Heather Morgan
The case of Ilya Lichtenstein, 35, and his spouse, Heather Morgan, 33, has reached a pivotal moment as they formally plead guilty. Following their arrest in February 2022, and after confiscating around 95,000 stolen crypto assets held by them, substantial attention had already been attracted. During that period, the seized funds carried a staggering valuation of $3.6 billion.
Seizure of Millions and Further Ties to Breach Unveiled
Subsequently, the U.S. Department of Justice (DoJ) disclosed the successful seizure of an additional sum of approximately $475 million linked to the breach.
Sophisticated Hacking and Transactions: Inside the DoJ’s Account
According to the DoJ, Lichtenstein employed a series of advanced hacking tools and methodologies to infiltrate Bitfinex’s network. Within the system, Lichtenstein deceptively authorized more than 2,000 transactions, transferring 119,754 bitcoins to a cryptocurrency wallet under his control.
Collaborative Laundering Efforts: Diverse Methods and Complex Strategies
Lichtenstein is alleged to have involved his spouse in executing intricate and diverse methods to launder the ill-gotten gains. These methods included creating online accounts using fake identities, converting a portion of the bitcoin into alternative cryptocurrencies and gold coins, and obfuscating the money trail through mixing services.
Darknet Channel: Illicit Funds Funneled to AlphaBay
The majority of the illicit funds flowed to the now-defunct darknet market, AlphaBay, as emphasized by blockchain analytics firm Chainalysis. This platform served as a mixing service, where stolen bitcoins were deposited and equivalent amounts were withdrawn.
Continued Route: Cryptocurrency’s Path Through Mixing Services and Exchanges
After the crackdown on AlphaBay, the culprits directed the stolen cryptocurrency through different mixing services and virtual currency exchanges (VCEs). During the years 2020 and 2021, they converted a portion of the digital assets into fiat currency and moved it to a U.S. bank account.
Conversion to Fiat: Cryptocurrency to U.S. Bank Account
As a part of their laundering efforts, the couple additionally employed bitcoin transferred to a VCE (referred to as VCE 10) to acquire gift cards for retailers like Walmart. This particular VCE specialized in facilitating crypto-for-gift card exchanges. Interestingly, these gift card transactions played a crucial role in the investigation.
Gift Cards and Clues: A Vital Link in the Investigation
Chainalysis explained, “The investigation identified critical leads through gift card purchases. By tracing the initial movement of cryptocurrency, investigators located a personal wallet address starting with 36B6mu. This address had received over $1 million worth of Bitcoin linked to the Bitfinex hack and was then utilized to fund the account at VCE 10, which in turn procured gift cards.
Redemption and Revelation: Walmart Gift Card Ties to Morgan
Notably, the investigation revealed that the Walmart gift card redemption occurred through the retailer’s iPhone app under an account registered in Morgan’s name. This breakthrough allowed authorities to secure a search warrant for the couple’s residence and their cloud storage accounts.
Cloud Storage Breakthrough: Unveiling Private Keys and Fraudulent Information
The examination of cloud storage yielded substantial results, including files with information on cryptocurrency addresses used in fund transfers. This covered private keys, fraudulent details for crypto exchanges, and plans for counterfeit passports.
Legal Consequences: Potential Sentences for Lichtenstein and Morgan
Lichtenstein, a Russian citizen, faces a potential maximum prison sentence of 20 years.
In contrast, with Morgan having openly admitted guilt to one count each of money laundering conspiracy and conspiracy to defraud the U.S., there could potentially be an imposition of a maximum 10-year jail term.
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