The 2016 hack of Bitfinex, a crypto exchange that trades in bitcoin, saw federal officials seize $3.6 billion of bitcoin.
Two individuals were arrested in New York by agents Tuesday for conspiring to launder Bitfinex hack proceeds in 2016. Heather Morgan and Ilya Lichtenstein, a married couple, were arrested in New York on Tuesday. They are accused of conspiring to launder proceeds from the Bitfinex hack in 2016. ET in New York according to a U.S. Department of Justice Press Release.
The 2016 hack saw the theft of 120,000 bitcoins, which was worth approximately $60 million at the time. This represented nearly one-sixth the trading volume. The total bitcoin theft is estimated at $4.5 billion at today’s prices. However, the DOJ only took 94,000 BTC worth $3.6 billion. DOJ releases claim that the two conspired in laundering these proceeds. However, the DOJ only seized 94,000 BTC valued at $3.6 billion.
Unauthorized transactions moved the stolen bitcoin into Lichtenstein’s wallet. Some 25,000 BTC were also transferred out during the last five years. Lichtenstein kept the remaining 94,000 BTC in his wallet.
The press release stated that special agents gained access to files in an online account owned by Lichtenstein after the execution of court-authorized searches warrants for online accounts controlled either by Morgan or Lichtenstein. These files contained the keys needed to access the digital wallet which received Bitfinex’s funds directly. This allowed special agents lawfully to seize and recover more 94,000 bitcoin stolen from Bitfinex. At the time of seizure, the recovered bitcoin was worth more than $3.6 billion.
On-chain sleuths discovered a transaction of more than 94,000 Bitfinex bitcoin last week. CoinDesk was told by sources that the federal agents had taken control of the seizure. Lisa Monaco, Deputy Attorney General, stated that it was the largest ever financial seizure in the department.
An attached statement to facts states that the United States is responsible for the theft. Authorities traced the proceeds of the hack to the BTC blockchain. They were transferred from the original recipient wallet to the wallets controlled by Morgan and Lichtenstein.
After decrypting a file saved to Lichtenstein’s cloud storage, law enforcement officers were able access the first recipient wallet, dubbed Wallet 1CGA4s. This file contained 2,000 crypto wallet addresses as well as their private keys.
The statement stated that “Blockchain analysis confirmed almost all of these wallets were directly connected to the hack”.
According to the defendants, they used several techniques to conceal the stolen bitcoin. These included splitting transactions into smaller transactions and using darknet markets. They also converted into other crypto like monero.
According to the statement, darknet market AlphaBay was a platform that defendants allegedly used.
Further, the statement of facts claims that some funds were transferred to an account linked to SalesFolk which Morgan owned.
LinkedIn profiles reveal that Heather R. Morgan, and Dutch Ilya Lichtenstein are listed as SalesFolk employees since 2009 and 2014. Morgan’s LinkedIn profile suggests that she was also a columnist for Inc. Magazine and Forbes. Lichtenstein lists prior roles at MixRank Endpass 500 Startups, MixRank and Endpass.
Bitfinex stated in a statement that it would cooperate with the DOJ to recover the seized Bitcoin. It will pay investors in its UNUS SEED LEO token if it succeeds. This token was created to help plug a fiscal gap created by Bitfinex seizing a payment processor that was not related to Bitfinex.
The company stated that Bitfinex would use 80% of the net funds it has recovered to repurchase or burn any UNUS LEO tokens. These token repurchases are possible in open market transactions, or by purchasing UNUS SED LEO through over-the-counter trades. This includes directly trading bitcoin for UNUS SED LEO.
Just after the news was announced, the LEO token started pumping against Bitfinex at 16:41 UTC. It rose from $4.97 up to $7 in less than an hour.
