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Couple arrested for laundering $4.5 billion of stolen cryptocurrency

New York-based Ilya Lichtenstein and his wife, Heather Morgan, were arrested on Tuesday for trying to launder cryptocurrency stolen from Bitfinex’s 2016 hack, currently valued at $4.5 billion. The US Department of Justice has recovered $3.6 billion so far. This is also the department’s largest financial seizure ever. 

Bitfinex, a cryptocurrency exchange, was breached in 2016 by an unknown hacker who initiated over 2000 unauthorised transactions, transferring the stolen Bitcoin to a digital wallet under Lichtenstein’s name. A total of 119,754 Bitcoin were stolen in the hack. 

The couple is expected to appear in a Manhattan court Wednesday afternoon on charges to conspire to launder the stolen 119,754 Bitcoin from the hack. However, they haven’t been charged for actually hacking the platform or theft.  

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Complicated, but not impossible

About 25,000 stolen Bitcoin were transferred out of the wallet via a complicated money laundering process into financial accounts controlled by Lichtenstein and Morgan in the last five years. The remaining more than 94,000 Bitcoin were still kept in the wallet.

At the time of the breach, the stolen Bitcoin amounted to about $65million, trading for $540 each. At the time of writing, Bitcoin is trading for $43,495.60, making about $5.2 billion. However, at the time of filing the court documents, the net worth stood at $4.6 billion. 

Photo by Andre Francois Mckenzie

Following court-authorised search warrants of online accounts controlled by the couple, special agents recovered files containing private keys required to access the wallet which directly received funds from the hack. The funds in the wallet were subsequently seized, coming in at about $3.6 billion in value at the time of the seizure. 

The complaint against the couple alleges that they employed “numerous sophisticated laundering techniques” including using fake identities to set up online accounts, using programs to automate transactions and converting the stolen Bitcoin into other forms of virtual currencies, including an anonymity-enhanced cryptocurrency called AEC — a process called ‘chain hopping’, among others. 

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