Recently, hacks on crypto exchanges have become quite frequent. From late last year till now, a number of hacks that have left people astonished have occurred. While some of these stolen funds were recovered like in the case of the Poly Network Hack, a whole lot more are still under investigation with no hope as to recovering these funds.
The US Department of Justice announced that it has seized 94,000 Bitcoins that were allegedly stolen in a 2016 hack on crypto platform Bitfinex. A married couple has also been arrested in connection to laundering the stolen funds. Their charges include conspiring to launder money and defraud the US government. The couple, Ilya Lichtenstein, 34, and Heather Morgan, 31, will be facing at least 25 years in prison if convicted of the crimes.
Per current Bitcoin prices, the seized asset is worth $3.6 billion and according to officials at the Department of Justice, it is the largest seized asset in the Department’s history. The Department of Justice also added that it did not recover all the stolen funds that Bitfinex lost in the 2016 hack. The platform lost 119,754 Bitcoins in 2016 which are currently worth about $4.5 billion.
The couple was not formally accused of hacking Bitfinex. Prosecutors only mentioned that they discovered the suspects because the Bitcoins were sent to a digital wallet that Ilya Lichtenstein owned. The Department of Justice said that the couple received the funds after a hacker tampered with Bitfinex’s systems and initiated more than 2,000 illegal transactions.
A background check on the couple shows that they are both tech enthusiasts and are deeply involved in the tech startup ecosystem. Ilya Lichtenstein, who has dual citizenship from the US and Russia and goes by the nickname “Dutch”, founded a Y Combinator-backed sales software company called MixRank. He also serves as a mentor at venture firm 500 Startups and an advisor to Ethereum wallet provider Endpass, per his profile, while Morgan has written columns for Forbes and Inc. On the other hand, Heather Morgan is the founder and CEO of B2B sales startup called SalesFolk.
Per reports, more than one-third of the stolen Bitcoins were transferred out of Lichtenstein’s wallet “via a complicated money laundering process” involving making accounts with fake names and converting the Bitcoins to other, more private digital currencies like Monero, a process known as “chain-hopping.” The 94,000 Bitcoins that weren’t laundered remained in the wallet that was used to store the proceeds from the hack, which is how agents say they were able to recover them after conducting an extensive online search through court-authorized warrants.
“Today, federal law enforcement demonstrates once again that we can follow money through the blockchain, and that we will not allow cryptocurrency to be a safe haven for money laundering or a zone of lawlessness within our financial system,” assistant attorney general Kenneth A. Polite Jr. of the Department of Justice’s criminal division said in the agency’s statement.
A statement released by Bitfinex after the discovery mentioned that the company will be working with authorities to return the stolen funds to their owners.
“We are pleased that the US Department of Justice has today announced that it has recovered a significant portion of the Bitcoin stolen during the August 2016 security breach. We have been cooperating extensively with the DOJ since its investigation began and will continue to do so. Bitfinex will work with the DOJ and follow appropriate legal processes to establish our rights to a return of the stolen Bitcoin. Bitfinex intends to provide further updates on its efforts to obtain a return of the stolen Bitcoin when those updates are available.