The US Justice Department (DoJ) announced the arrest of a married couple on Tuesday in connection with a plot to launder $4.5 billion in cryptocurrencies stolen from the 2016 hack of the virtual currency exchange Bitfinex.
Ilya Lichtenstein, 34, and his wife, Heather Morgan, 31, both from New York, are claimed to have “stolen funds through a labyrinth of cryptocurrency transactions,” with the law enforcement obtaining more than $3.6 billion in cryptocurrency by tracking the money trails, resulting in the “largest financial seizure ever.”
“Bitfinex will work with the DoJ and follow appropriate legal processes to establish our rights to a return of the stolen bitcoin,” the company said in a statement, adding, “We have been cooperating extensively with the DoJ since its investigation began and will continue to do so.”
The scheme entailed shifting 119,754 bitcoins (BTC) from Bitfinex through more than 2,000 unlawful transactions transferred to a digital wallet controlled by Lichtenstein. Approximately 25,000 stolen bitcoins were subsequently moved and placed into the couple’s financial accounts over the last five years.
According to IRS inspector Christopher Janczewski, a part of the stolen BTC flowed out of Wallet 1CGA4s in a series of modest, complicated transactions across several accounts and platforms beginning in or around January 2017. This shuffle, resulting in several transactions, appeared to be intended to obscure the path of the stolen bitcoins, making it difficult for law enforcement to track them down.
The defendants used many sophisticated laundering tactics to accomplish this, including:
- Creating online accounts under false names,
- Employing software to automate transactions,
- Depositing stolen money into accounts at various darknet markets and virtual currency exchanges to mask the transaction trail,
- Converting bitcoin to other private digital currencies, such as Monero, via the chain hopping process, and
- Misusing business accounts in the United States to legitimate their banking activities.
When online accounts of two individuals were searched after a court-ordered search warrant, law enforcement officials eventually gained access to a file uploaded to Lichtenstein’s cloud storage account that held the private keys needed to access the digital wallet where the payments were received. This allowed the authorities to reclaim the remaining bitcoins (more than 94,000).
Both Lichtenstein and Morgan face charges of money laundering conspiracy, which has a possible penalty of 20 years in prison, and conspiracy to defraud the United States, which carries a maximum term of five years in jail.