By Emmanuel Nduka
The United States Department of Justice has seized about $3.6bn in Bitcoin stolen during a 2016 hack of the Bitfinex currency exchange, the largest financial seizure ever.
A New York couple, Ilya Lichtenstein, 34 and his wife, Heather Morgan, 31, were arrested, the Justice Department said.
The duo were detained on Tuesday morning and were scheduled to appear at Federal Court in Manhattan later in the day.
They both appear to have had colorful social media accounts ahead of their arrests and allegedly conspired to launder 119,754 Bitcoin stolen after a hacker breached Bitfinex’s systems.
“Today’s arrests, and the Department’s largest financial seizure ever, show that cryptocurrency is not a safe haven for criminals.
“In a futile effort to maintain digital anonymity, the defendants laundered stolen funds through a labyrinth of cryptocurrency transactions,” Deputy Attorney General Lisa Monaco said in a statement.
Bitfinex is the exchange affiliated with the world’s biggest stablecoin, Tether.
As at the time of the hack, the digital currency haul was estimated at about $71 million, the Justice Department said, adding that the total value of stolen Bitcoin is now worth about $4.5 billion.
Ari Redbord, a former Federal Prosecutor who is now the Head of Legal and Government Affairs at TRM Labs, a blockchain intelligence company, said “this case and the arrests today are extraordinary,” adding that “this is further proof that the nature of the blockchain, the forever open ledger, allows investigators to follow the money in ways impossible in complex webs of shell companies and bulk cash smuggling.”
According to DOJ, the couple used sophisticated techniques, including “using fictitious identities to set up online accounts; utilizing computer programs to automate transactions, a laundering technique that allows for many transactions to take place in a short period of time; depositing the stolen funds into accounts at a variety of virtual currency exchanges and darknet markets and then withdrawing the funds.”
Lichtenstein and Morgan also funnelled the money through AlphaBay Marketplace, which was shut down in 2017, to hide their transactions. Some of the money was cashed out through Bitcoin ATMs. Some was used to buy NFTs and gold. They even used the money to buy a Walmart gift card.
While Lichtenstein who was nicknamed “Dutch,” described himself as an angel investor in technology companies, as well as an adviser to multiple startups, according to a public LinkedIn profile, Morgan, who prosecutors say used the alias “razzlekhan,” promoted herself as a part-time rapper, entrepreneur and media personality on what appears to be her personal website. In one post, the defendant described herself as “the infamous crocodile of Wall Street” and “like Genghis Khan, but with more pizzazz.”
Another separate Instagram account that appears to be associated with the defendant included videos of Morgan, as Razzlekhan, rapping and appearing at a wedding ceremony in which she was carried on a throne by roughly eight people.
Bitfinex reported a security breach and halted all trading, withdrawals and deposits in August 2016. The company later disclosed in a blog post that some of its users had their Bitcoin stolen, and that it had reported the theft to law enforcement.
Bitfinex said in a statement that it has been cooperating “extensively” with the Justice Department throughout the investigation and that it will seek “to establish our rights to a return of the stolen Bitcoin.”
Both Lichtenstein and Morgan may face up to 20 years in prison for the money laundering charges. In addition, they could receive an additional sentence of up to five years for conspiracy to defraud the US, the Justice Department statement.
Discussion about this post