The Department of Justice (DoJ) in the United States announced that they have made arrests and seized $3.6 billion worth of Bitcoin from the hackers who stole 119,756 BTC from the cryptocurrency exchange Bitfinex, six years ago.
According to the U.S. Department of Justice press release, it stated that the body had ordered the arrest of Ilya Lichtenstein and his wife Heather Morgan for allegedly conspiring to launder crypto connected to the 2016 Bitfinex hack.
The 119,756 BTC, worth $72 million at the time hack in August 2016, is now worth approximately $5.2 billion. The DoJ stated that it was able to gain access and seize about 94,000 BTC worth approximately $4.1 billion. The DOJ release alleges the two conspired to launder these proceeds and heavily implies, but does not claim, they were the original hackers.
What you should know
- Since the 2016 hack, individuals connected to the stolen coins have periodically moved small amounts of BTC in separate transactions, leaving the bulk of the funds untouched. The DoJ reported that it had traced 25,000 BTC of these transferred funds to financial accounts controlled by Lichtenstein and Morgan.
- In a statement, Bitfinex said it would work with the DOJ to try and recover the seized bitcoin. If it does, it will repay investors in its UNUS SED LEO token, which was created to try and backstop a fiscal hole created after an unrelated payment processor used by Bitfinex was seized by authorities in three different countries.
- Bitfinex stated, “If Bitfinex receives a recovery of the stolen bitcoin, as described in the UNUS SED LEO token white paper, Bitfinex will, within 18 months of the date it receives that recovery, use an amount equal to 80% of the recovered net funds to repurchase and burn outstanding UNUS SED LEO tokens. These token repurchases can be accomplished in open market transactions or by acquiring UNUS SED LEO in over-the-counter trades, including directly trading bitcoin for UNUS SED LEO.”
What they are saying
Deputy Attorney General Lisa Monaco stated, “Today’s arrests, and the department’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. 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.”
Assistant Attorney General for the Criminal Division of the DoJ Kenneth Polite added that federal authorities had the ability to “follow money through the blockchain.” The announcement stated that Morgan and Lichtenstein used a variety of methods to launder the illicit crypto, including chain hopping, depositing the coins at exchanges and darknet markets and withdrawing them, and automating transactions using computer programs. In addition, the pair allegedly set up business accounts in the United States to “legitimize their banking activity.”
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Both investigative teams from the FBI and the Cyber Crimes Unit of the Internal Revenue Services’ criminal investigation agency said they had worked to trace the funds from the 2016 hack. Though neither agency specified how authorities were initially led to Morgan and Lichtenstein, FBI Deputy Director Paul Abbate said the agency had “the tools to follow the digital trail.”
The DoJ’s actions represent the biggest seizure of crypto by government authorities, with the 2016 Bitfinex hack one of the biggest thefts in the history of the crypto space. Authorities have charged Lichtenstein and Morgan with conspiracy to commit money laundering and conspiracy to defraud the United States. Each could face up to 25 years in prison.
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