A New York couple was arrested Tuesday for allegedly conspiring to launder about $4.5 billion in cryptocurrency stolen during the 2016 hack of the virtual currency exchange Bitfinex, federal officials said.
Ilya Lichtenstein, 34, and his wife, Heather Morgan, 31, were arrested in Manhattan, the U.S. Justice Department said.
The hack of Hong Kong-based cryptocurrency exchange is considered one of the biggest crypto heists in history. Law enforcement has seized over $3.6 billion in cryptocurrency linked to that hack, officials said.
'A Labyrinth of Cryptocurrency Transactions'
“Cryptocurrency and the virtual currency exchanges trading in it comprise an expanding part of the U.S. financial system, but digital currency heists executed through complex money laundering schemes could undermine confidence in cryptocurrency,” U.S. Attorney Matthew Graves for the District of Columbia, said in a statement.
Deputy Attorney General Lisa Monaco said that “in a futile effort to maintain digital anonymity, the defendants laundered stolen funds through a labyrinth of cryptocurrency transactions."
In October, Monaco announced the creation of a National Cryptocurrency Enforcement Team (NCET), "to tackle complex investigations and prosecutions of criminal misuses of cryptocurrency."
Lichtenstein and Morgan allegedly conspired to launder the proceeds of 119,754 bitcoin that were stolen from Bitfinex’s platform after a hacker breached Bitfinex’s systems and initiated more than 2,000 unauthorized transactions.
The unauthorized transactions sent the stolen bitcoin to a digital wallet under Lichtenstein’s control.
Over the last five years, roughly 25,000 of the stolen bitcoin were transferred out of Lichtenstein’s wallet via what officials called "a complicated money laundering process" that ended with some of the stolen funds being deposited into financial accounts controlled by Lichtenstein and Morgan, officials said.
The remainder of the stolen funds, comprising more than 94,000 bitcoin, remained in the wallet used to receive and store the illegal proceeds from the hack.
FBI agents obtained access to files within an online account controlled by Lichtenstein that contained the private keys required to access the digital wallet that directly received the funds stolen from Bitfinex.
Agents seized more than 94,000 bitcoin that had been stolen from Bitfinex. The recovered bitcoin was valued at over $3.6 billion at the time of seizure.
'Chain Hopping'
Officials said Lichtenstein and Morgan employed used several laundering techniques, including using fictitious identities to set up online accounts and using computer programs to automate transactions, a laundering technique that allows for many transactions to take place in a short period of time.
The couple also deposited the stolen funds into accounts at a variety of virtual currency exchanges and darknet markets and then withdraw the funds, which obscures the trail of the transaction history by breaking up the fund flow.
They also allegedly converted bitcoin to other forms of virtual currency, including anonymity-enhanced virtual currency (AEC), in a practice known as “chain hopping”; and using U.S.-based business accounts to legitimize their banking activity.
Lichtenstein and Morgan are charged with conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison, and conspiracy to defraud the United States, which carries a maximum sentence of five years in prison.
The couple is scheduled to make their initial appearances in federal court Tuesday at 3:00 p.m. in the U.S. District Court for the Southern District of New York.
Other big crypto heists Poly Network in August 2021, when a hacker stole funds worth $600 million and Coincheck in 2018, which lost more than $530 million in tokens.
Last week, Wormhole, a DeFi protocol that links blockchain Solana, said hackers stole cryptocurrencies valued at more than $323 million.
