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On Tuesday, February 8th, 2022 the U.S. Department of Justice (DOJannounced that they had arrested Ilya Lichtenstein and his wife Heather Morgan in connection with a 2016 hack of Bitfinex, a popular cryptocurrency exchange. Although the couple have not been accused of committing the original hack, they have been charged with conspiracy to launder the stolen funds and defraud the United States. At the time of the hack, the nearly 120,000 bitcoin stolen was worth approximately $60 million – at today’s prices, it’s worth approximately $4.5 billion.

Of the 119,754 bitcoin stolen from the Bitfinex platform, the DOJ recovered nearly 94,000 BTC (worth approximately $3.6B at today’s price). In court documents the DOJ alleges that Lichtenstein and Morgan conspired to launder the proceeds of the stolen bitcoin after a hacker breached the Bitfinex platform and completed more than 2,000 unauthorized transactions that sent the bitcoin to a wallet owned by Lichtenstein. Since the hack, approximately 25,000 of the stolen bitcoin were transferred to financial accounts owned by Lichtenstein and Morgan via a complicated money laundering process. The remainder of the stolen funds were kept in the original wallet.

After receiving court-authorized search warrants, special agents were able to access online accounts controlled by Lichtenstein and Morgan. In these accounts, agents identified files containing the private keys required to access the wallet that directly received bitcoin stolen from Bitfinex. This allowed agents to lawfully seize and recover more than 94,000 bitcoin, worth nearly $3.6B. In a statement, Deputy Attorney General Lisa Monaco said it was “the department’s largest financial seizure ever.

According to the DOJ report, the couple had employed several money laundering techniques, including using false identities, utilizing software to automate transactions, depositing stolen funds into accounts at a variety of exchanges and “darknet markets,” converting the stolen bitcoin to alternative digital assets, and using U.S.-based business accounts to legitimize their banking activity. Chief Jim Lee of IRS-Criminal Investigation (IRS-CI) said, “in a methodical and calculated scheme, the defendants allegedly laundered and disguised their vast fortune.” However their pattern of suspicious behavior did not go unnoticed by U.S. law enforcement. “IRS-CI Cyber Crimes Unit special agents have once again unraveled a sophisticated laundering technique, enabling them to trace, access and seize the stolen funds, which has amounted to the largest cryptocurrency seizure to date,” said Chief Lee. 

In a public statement released on Tuesday, Bitfinex said that they “will work with the DOJ and follow appropriate legal processes to establish [their] rights to a return of the stolen bitcoin.” They added that if they receive any of the stolen bitcoin, they will “use an amount equal to 80% of the recovered net funds to repurchase and burn outstanding UNUS SED LEO tokens.” 

Lichtenstein and Morgan are charged with conspiracy to commit money laundering and conspiracy to defraud the United States. If found guilty, their charges carry a total maximum sentence of 25 years. The investigation was led by IRS-CI Washington, D.C. Field Office’s Cyber Crimes Unit, the FBI’s Chicago Field Office, and Homeland Security Investigations (HSI) New York unit. 

 

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Daniel is a data scientist who enjoys writing bitcoin and financial content. He is the co-founder of Green Candle Investments, a bitcoin and finance media company.



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