A computer expert who stole Bitcoin now worth billions of dollars has been sentenced to five years in prison.
Ilya Lichtenstein masterminded one of the largest-ever thefts from a virtual currency exchange before he and his wife, Heather Rhiannon Morgan, carried out an elaborate scheme to liquidate the stolen funds, according to federal prosecutors.
“He became one of the greatest money launderers that the government has encountered in the cryptocurrency space,” prosecutors wrote.
In August 2016, Lichtenstein hacked into a virtual currency exchange, Hong Kong-based Bitfinex, and stole approximately 120,000 bitcoins, reports the Associated Press.
It was worth approximately $71 million at the time of the hack and would be valued at more than $7.6 billion at current market prices, according to prosecutors.
Several months later, Lichtenstein began moving the stolen bitcoin in a string of complex transactions designed to conceal its path across a series of accounts and platforms. He enlisted his wife’s help in cleaning the stolen funds.
Lichtenstein and Morgan were living in New York City when they were arrested in February 2022. They had been living in San Francisco around the time of the hack.
Prosecutors recommended a five-year prison sentence for Lichtenstein, who pleaded guilty in August 2023 to one count of money laundering conspiracy.
They recommended an 18-month prison sentence for Morgan, who pleaded guilty to the same charge.
Lichtenstein has expressed remorse for “wasting my talents on crime instead of a positive contribution to society” and a US court heard how he hopes to fight cybercrime when he gets out of prison.
“I want to take full responsibility for my actions and make amends any way I can,” he said.
“Neither the hack nor the laundering scheme was an impulsive decision. The defendant (Lichtenstein) spent months attempting to gain access to Bitfinex’s infrastructure and get the accesses and permissions he needed in order to orchestrate his hack,” prosecutors wrote.
Lichtenstein told his wife about the hack over three years later, but he initially solicited her help in laundering the proceeds “without explaining exactly what he was doing,” according to prosecutors.
Morgan “was certainly a willing participant and bears full responsibility for her actions, but she was a lower-level participant,” prosecutors wrote.
During family trips to Kazakhstan and Ukraine, Lichtenstein met with couriers who delivered him money that he smuggled back into the US.
“Over half a decade, the defendant engaged in what IRS agents described as the most complicated money laundering techniques they had seen to date,” prosecutors wrote.
Bitcoin is the largest and oldest cryptocurrency, which is digital money that typically isn’t backed by any government or banking institution. Transactions get recorded with technology called a blockchain.
The couple successfully laundered about 21 per cent of the funds stolen from Bitfinex.
The laundered money was worth at least $14 million at 2016 prices but its value would have exceeded $1 billion at the time of their 2022 arrest.
Authorities seized the remaining funds, collectively valued at over $6 billion at current prices.
An attorney for Bitfinex said the hack “devastated” its finances and its reputation with its customers, with the stolen funds accounting for approximately 36 per cent of the company’s assets at the time of theft.
“Bitfinex had to take unprecedented and immediate action to ensure that any losses from the Hack would ultimately be borne by Bitfinex and its shareholders alone, not its customers,” the lawyer, Barry Berke, wrote in a letter to the judge.
A prosecutor said Lichtenstein immediately began cooperating with federal authorities after his arrest, helping them with other cybercrime investigations.
Over 96 per cent of the stolen funds have been recovered, with help from Lichtenstein, according to defence attorney Samson Enzer. The “vast bulk” of the stolen money was never spent, the lawyer said.
“This is not an evil person,” Enzer said. “This is a good person who made some very bad mistakes.”
