A couple from New York was arrested and charged with conspiring to launder $4.5 billion in Bitcoins stolen from cryptocurrency exchange Bitfinex.
In 2016, the hackers had stolen nearly 1,20,000 Bitcoins from Bitfinex worth about $70 million. Today, the treasure is worth $4.5 billion.
Law enforcement officials seized $3.6 billion in what the US Deputy Attorney General Lisa Monaco described as “the department's largest financial seizure ever.”
The heist
In 2016, 119,754 Bitcoins were stolen from Bitfinex’s platform after a hacker breached into the Hong Kong-based digital-currency exchange. The hack had resulted in a sharp drop in the price of Bitcoin.
The couple employed numerous sophisticated laundering techniques, including setting up online accounts with fictitious identities. They laundered the stolen funds through a number of automated cryptocurrency transactions, using computer programs. This technique allows hackers to conduct several transactions in a short period of time.
The stolen funds were deposited in accounts at various virtual currency exchanges and darknet markets and later withdrawn. This process breaks up the fund flow and obscures the money trail. Apart from this, the couple also employed a practice known as ‘chain hopping,’ in which the stolen Bitcoins were converted into other forms of cryptocurrency, including anonymity-enhanced virtual currency (AEC). The nefarious activities were obscured under the veil of their startup business accounts.
Morgan had approached a bank saying clients of her writing company SalesFolk had urged her to accept payments in Bitcoins. She also used some Bitcoins given by her husband to expand the business. These Bitcoins were all from the Bitfinex heist.
Similarly, Lichenstein transferred around $2.9 million in Bitcoins into the accounts of two of his companies -- Endpass and Demandpath.
The charge
The couple is charged with conspiracy to commit money laundering, which carries a maximum sentence of up to 20 years in prison, and conspiracy to defraud the US, which carries a maximum term of up to five years in prison.
However, Morgan and Lichenstein were not charged with conducting the hack itself, Moneycontrol reported.
Win for law department
The arrests and the money seizure come as a win for the US law enforcement amid a slew of heists from cryptocurrency platforms in recent years.
“Today’s arrests, and the department’s largest financial seizure ever, show that cryptocurrency is not a safe haven for criminals,” Lisa O. Monaco said in a statement issued by the US Department of Justice.
According to the Deputy Attorney General, the law department has proved that it can trace money in whatever form it takes, even if it is through the blockchain.
“We will not allow cryptocurrency to be a safe haven for money laundering or a zone of lawlessness within our financial system,” Kenneth A. Polite Jr, Assistant Attorney General of the Justice Department’s criminal division, said.
With the rise in ransomware attacks and other hacks, US law officials have more aggressively engaged in tracking and seizing hacked cryptocurrency. Last year, law enforcement agencies were able to recover $2.3 million of the $4.4 million ransom paid by Colonial Pipeline to a Russian-speaking gang.
Despite use of sophisticated money laundering techniques, indelible blockchain records have helped law officials link criminal activity to individuals, Tom Robinson, Co-Founder of cryptocurrency analysis firm Elliptic, told CNN.
