It was a $500 Walmart gift card that led federal investigators to a couple who allegedly conspired to launder cryptocurrency that was stolen during the 2016 hack of Bitfinex, a virtual currency exchange platform. The stolen Bitcoins are now worth $4.5 billion.
The gift card was sent to a Russian-registered email and investigators traced the transaction and found it was conducted via an IP address linked to a cloud service provider in New York. This allowed them to tie the IP address to the lead accused, Ilya Lichtenstein.
Heather Morgan, 31, a published Forbes writer and rapper, who goes by the name ‘Crocodile of Wall Street,’ and her husband Ilya Lichtenstein, 34, a startup founder, were arrested for swindling of money from the exchange.
In the Bitcoin ecosystem, all transactions are recorded in a public ledger for anyone to review. Analysing patterns of these transactions can reveal groups that seem to share a connection or common source.
The Wall Street Journal reported that the court documents of the case show federal agents used sophisticated software tools to search for connections and patterns using a process called cluster analysis. A particular cluster of Bitcoin addresses, identified as 36B6mu, caught investigators’ attention.
On May 3, 2020, a fraction of a Bitcoin was sent from the cluster to an exchange that sells prepaid gift cards. A $500 gift card for Walmart was sent in exchange to a Russian-registered email. However, according to the agents, the transaction was conducted via an IP address linked to a cloud service provider in New York. Investigators then linked the address to Lichtenstein.
Morgan and Lichtenstein purportedly spent the proceeds from their laundering scheme on various purchases, including a $500 Walmart gift card, gold coins and NFTs, according to the criminal complaint.
A portion of the $500 gift card were redeemed through Walmart’s phone app. According to the court filings, three purchases were made using Morgan’s name from one of her emails and the couple’s apartment address in New York was provided for delivery. That gift and more than a dozen other cards, for services such as Uber, Hotels.com and PlayStation, were traced back to the pair, The Wall Street Journal reported.
The couple is accused of laundering Bitcoin using several criminal techniques. These include the use of fake IDs, coding computer programs to make faster automated transactions, and depositing stolen funds across one crypto exchange in several accounts to cover previous transactions. They are also accused of converting Bitcoin to other forms of crypto currency and creating US-based business accounts to wire funds.
Earlier on January 5, federal agents raided the couple’s Wall Street apartment.
According the WSJ report, law enforcement agents seized more than $40,000 in cash from the apartment. Investigators also seized more than 50 electronic devices and a plastic bag marked ‘burner phone,’ prosecutors said in court filings.
Investigators were able to access Lichtenstein’s email and cloud account. On January 31, they were able to break the encryption for several of the files. In the files they found a spreadsheet listing various accounts, including some of those that had been abandoned when exchanges asked for identity verification.
Another folder named ‘personas’ and ‘passport ideas’ had fake identification documents. They also found a file containing all of the addresses within the digital wallet where most of the Bitcoins that had been stolen from Bitfinex were being kept.
The Justice Department said it has captured $3.6 billion in cryptocurrency from the Bitfinex hack in its “largest financial seizure ever,” reported The New York Post.
