The historic amounts of stolen cryptocurrency were equivalent to around $70 million in 2016. Over time, BTC value has skyrocketed and hackers have strategically shifted copious amounts to anonymous wallets. The process of shifting culminated in a record single transfer of around $380 million worth of Bitcoin, tracked last week by various blockchain tracking organizations.
DOJ Seized $3.6 Billion in BTC and Arrested Two
Amid a DOJ cybersecurity initiative to crack down on cryptocurrency cybercrime, law enforcement arrested two unassuming, eccentric individuals, tied to the high-profile 2016 Bitfinex hack. The hack was so impactful that it caused Bitcoin to plummet by 20% at the time. Prosecutors have charged a New York-based Manhattenite husband and wife “conspiring to launder billions stolen in 2016 breach.” The federal court in Washington D.C. has proposed a 25-year sentence for the laundering of 119,754 BTC now valued at a dizzying $4.5 billion. The official DOJ press release stated that “numerous accounts set up with fictitious personas and involved in the laundering were, in fact, controlled by LICHTENSTEIN and MORGAN.”
Unassuming Duo are Money Laundering Specialists
The private lives of the couple are reminiscent of a scenario from spy action thrillers like “Bourne” and “Oceans.” Dual U.S.-Russian citizens Ilya “Dutch” Lichtenstein and his wife Heather Morgan are high-profile cybercriminals, disguised under a saucy social media presence. Morgan is a public rap singer known as “Razzlekhan”, a journalist who has written for Forbes, and corporate coach among other vocations. She has proclaimed herself the “Crocodile of Wall Street.” Lichtenstein, Morgan’s husband, is co-founder of an online marketing firm with mysterious foreign ties. The DOJ also remarked that the couple laundered the money through many exchanges in small amounts totaling thousands of automated transactions, claiming that the money represented payments to Morgan’s startup. The stolen funds were deposited into accounts via fictitious identities at various exchanges and darknet markets and quickly withdrawn to break up the fund flow thereby cloaking the process. The BTC was also converted to other forms of cryptocurrency including anonymity-enhanced cryptocurrency by chain hopping on U.S.-based legitimate business accounts.
Perpetrators spent stolen currency on various items
The couple spent some of the stolen currency “on items ranging from gold and non-fungible tokens to a $500 Walmart gift card”, prosecutors said.
Evidence of multiple counts of fraud found in an apartment
Law enforcement broke into the perpetrators’ apartment and found burner phones, fraudulent passports, and falsified identification.
U.S. court has granted bail
Although prosecutors were against setting bail for the couple with the belief that they would run, a U.S. judge has since granted bail for Lichtenstein at $5 million, and $3 million for Morgan. The couple’s parents have put up their homes as bonds.
Dark Web Website AlphaBay Offered Breadcrumbs
According to news reports, the law enforcement takeover of the dark web portal AlphaBay in 2017 unearthed a trail of breadcrumbs that would eventually reveal the clandestine money laundering operation. AlphaBay was a darknet market that supported online fraud, cybercrime and sold everything from counterfeit goods to illegal substances. Blockchain analyst Elliptic emphasized that the takedown of AlphaBay and the subsequent discovery of internal transaction logs is what most likely led the case back to Ilya Lichtenstein, and allowed law enforcement to access his private account keys.
Cryptocurrency Is Not a Safe Haven
Whether they will serve a prison sentence or not is up in the air at this point. However, Deputy Attorney General Lisa Monaco underlined that this proves cybercriminals should not think cryptocurrency is a haven for them. The DOJ “can follow money across the blockchain, just as we have always followed it within the traditional financial system,” stated Kenneth Polite, the assistant attorney general of the DOJ’s Criminal Division.
Bitfinex Statement to the U.S. DOJ
Bitfinex released a statement acknowledging and thanking the DOJ, also stating that they are working on returning the stolen BTC and providing further updates “as and when those updates are available.” Bitfinex has also promised to burn any outstanding “SED LEO” tokens — issued by Bitfinex’s parent company iFinex in 2019 to recoup losses from the 2016 hack — if the stolen BTC is returned.
