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Justice Dept. Seizes $3.6 Billion in Bitcoin and Arrests Married Couple

By , in Politics , at February 9, 2022

The couple had been accused of conspiring to launder Bitcoin that had been stolen in 2016 from Hong Kong-based Bitfinex, one of many world’s largest digital foreign money exchanges.

WASHINGTON — The Justice Division mentioned on Tuesday that it had seized over $3.6 billion price of stolen Bitcoin and arrested a married couple accused of laundering the cryptocurrency that hackers had stolen six years in the past.

The couple, Ilya Lichtenstein, 34, and Heather Morgan, 31, had been accused in a legal criticism of conspiring to launder 119,754 Bitcoin that had been stolen in 2016 from Hong Kong-based Bitfinex, one of many world’s largest digital foreign money exchanges.

The worth of the foreign money on the time of its seizure final week makes it the division’s largest monetary seizure ever, officers mentioned.

A Justice Division official declined to touch upon whether or not Mr. Lichtenstein and Ms. Morgan had been concerned within the hacking itself.

The breach in 2016 was amongst a spate of hackings into foreign money exchanges which have allowed for the theft of enormous quantities of digital foreign money. Even when the stolen funds had been recovered, the thefts underscored the safety vulnerabilities within the comparatively new world of cryptocurrency. In some circumstances, the incidents drastically affected cryptocurrency values.

After the hacking of Bitfinex, one of many largest exchanges within the historical past of the cryptocurrency market, the worth of Bitcoin initially plunged about 20 p.c.

The arrests on Tuesday “present that cryptocurrency shouldn’t be a secure haven for criminals,” Lisa O. Monaco, the deputy lawyer basic, mentioned in a press release. “In a futile effort to keep up digital anonymity, the defendants laundered stolen funds by a labyrinth of cryptocurrency transactions.”

Mr. Lichtenstein and Ms. Morgan appeared in a federal courtroom in Manhattan on Tuesday afternoon. A decide ordered them launched on bond: $5 million in Mr. Lichtenstein’s case and $Three million in Ms. Morgan’s. A lawyer representing them didn’t instantly reply to a request for remark.

Mr. Lichtenstein, who goes by the nickname Dutch, has each American and Russian citizenship and has described himself as a tech entrepreneur, in keeping with the criticism. Ms. Morgan describes herself on her LinkedIn web page as “a serial entrepreneur” and an “irreverent comedic rapper.” The criticism, which additionally accuses the couple of conspiracy to defraud the USA, suggests Ms. Morgan additionally goes by the alias Razzlekhan.

Anna Moneymaker for The New York Instances

In line with court documents, the hacker who breached Bitfinex’s methods initiated 2,000 transactions to ship 119,754 stolen Bitcoin to a digital pockets that was below Mr. Lichtenstein’s management.

During the last 5 years, about 25,000 of these Bitcoin had been transferred out of Mr. Lichtenstein’s pockets utilizing a sophisticated sequence of transactions meant to obscure that the foreign money had been stolen from Bitfinex, the Justice Division mentioned.

However investigators traced the motion of the Bitcoin on the blockchain, the everlasting mounted digital ledger that data every time a Bitcoin strikes to a brand new digital pockets. And a few of these funds had been ultimately deposited into monetary accounts managed by Mr. Lichtenstein and Ms. Morgan, who used a number of the cash to purchase gadgets similar to gold, nonfungible tokens and a Walmart present card, in keeping with the criticism.

Legislation enforcement officers gained entry to Mr. Lichtenstein’s pockets on Jan. 31, after they obtained a search warrant that gave them entry to encrypted recordsdata in Mr. Lichtenstein’s cloud storage account.

The following day, investigators seized the 94,636 Bitcoin that remained in that pockets, which had been price greater than $3.6 billion, in keeping with courtroom papers. The overall 119,754 Bitcoin that had been stolen, price about $71 million when Bitfinex was hacked in 2016, at the moment are price greater than $4.5 billion, in keeping with the Justice Division.

The arrest exhibits that “we won’t enable cryptocurrency to be a secure haven for cash laundering or a zone of lawlessness inside our monetary system,” Kenneth A. Well mannered Jr., the pinnacle of the Justice Division’s legal division, mentioned in a press release.

With extra People shopping for and promoting cryptocurrencies like Bitcoin, regulators have introduced some massive exchanges in the USA below official oversight.

However cryptocurrencies transfer by decentralized pc networks that aren’t below the management of any single authorities or firm, so most buying and selling nonetheless happens on largely unregulated exchanges like Bitfinex, which give shoppers little details about their operations.

The dearth of regulation has led to a bunch of issues on the earth of digital foreign money exchanges, threatening to impair shopper confidence in cryptocurrencies and to sluggish widespread adoption. The primary Bitcoin trade, Mt. Gox, collapsed in 2014 after hackers breached its safety methods and siphoned away $500 million in buyer cash.

And regulation enforcement officers have introduced criminal charges in opposition to individuals who personal exchanges and are suspected of facilitating legal exercise.

Ed Shanahan contributed reporting from New York.


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