Two people have been arrested in Manhattan overnight for an alleged conspiracy to launder USD$4.5 billion (AUD$6.2 billion) of cryptocurrency that was stolen during a 2016 hack of virtual currency exchange Bitfinex.
While the US Justice Department values the allegedly laundered haul at US$4.5 billion, it was originally worth US$7.1 million - representing the significant increase in the value of bitcoin since Bitfinex was hacked.
Thus far, authorities have seized more than USD$3.6 billion (AUD$5.05 billion) in cryptocurrency linked to the hack - the department’s largest financial seizure ever.
“Today’s arrests, and the department’s largest financial seizure ever, show that cryptocurrency is not a safe haven for criminals,” Deputy Attorney General Lisa O. Monaco said.
“In a futile effort to maintain digital anonymity, the defendants laundered stolen funds through a labyrinth of cryptocurrency transactions.
“Thanks to the meticulous work of law enforcement, the department once again showed how it can and will follow the money, no matter what form it takes.”
Ilya Lichtenstein (34) and his wife Heather Morgan (31), both of New York, New York, have been arrested for the alleged conspiracy to launder the bitcoin and appeared before the Federal Court a few hours ago.
According to court documents, Lichtenstein and Morgan allegedly conspired to launder the proceeds of 119,754 bitcoin that were stolen from Bitfinex’s platform after a hacker breached Bitfinex’s systems and initiated more than 2,000 unauthorised transactions.
The Justice Department says over the last five years, approximately 25,000 of those stolen bitcoin were transferred out of Lichtenstein’s wallet via a complicated money laundering process that ended with some of the stolen funds being deposited into financial accounts controlled by the couple.
The remainder of the stolen funds, comprising more than 94,000 bitcoin, remained in the wallet used to receive and store the illegal proceeds from the hack.
As part of an investigation, special agents obtained access to files within an online account controlled by Lichtenstein. Those files contained the private keys required to access the digital wallet that directly received the funds stolen from Bitfinex, and allowed agents to lawfully seize and recover more than 94,000 bitcoin that had been stolen from Bitfinex.
“Cryptocurrency and the virtual currency exchanges trading in it comprise an expanding part of the US financial system, but digital currency heists executed through complex money laundering schemes could undermine confidence in cryptocurrency,” US Attorney for the District of Columbia Matthew M. Graves said.
“The Department of Justice and our office stand ready to confront these threats by using 21st-century investigative techniques to recover the stolen funds and to hold the perpetrators accountable.”
The criminal complaint alleges that Lichtenstein and Morgan employed numerous sophisticated laundering techniques, including using fictitious identities to set up online accounts; utilising 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, which obfuscates the trail of the transaction history by breaking up the fund flow; converting bitcoin to other forms of virtual currency, including anonymity-enhanced virtual currency (AEC), in a practice known as “chain hopping”; and using U.-based business accounts to legitimise their banking activity.
“Criminals always leave tracks, and today’s case is a reminder that the FBI has the tools to follow the digital trail, wherever it may lead,” FBI deputy director Paul M. Abbate said.
“Thanks to the persistent and dedicated work of our FBI Investigative teams and law enforcement partners, we're able to uncover the source of even the most sophisticated schemes and bring justice to those who try to exploit the security of our financial infrastructure.”
Lichtenstein and Morgan are charged with conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison, and conspiracy to defraud the United States, which carries a maximum sentence of five years in prison.
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