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 1. Home
 2. Personal Finance
 3. Financial Crime


FINANCIAL CRIME




FEDS ARREST HUSBAND-AND-WIFE TEAM AND RECOVER $3.6 BILLION IN BITCOIN STOLEN IN
2016 FROM BITFINEX — THE LARGEST GOVERNMENT SEIZURE IN HISTORY

Last Updated: Feb. 8, 2022 at 1:07 p.m. ET First Published: Feb. 8, 2022 at
12:05 p.m. ET
By

LUKAS I. ALPERT

  comments


THE MONEY WAS FOUND IN ACCOUNTS CONTROLLED BY HUSBAND AND WIFE, ILYA
LICHTENSTEIN AND HEATHER MORGAN, WHO HAVE BEEN CHARGED WITH MONEY LAUNDERING AND
FRAUD.

PROSECUTORS SAY THEY RECOVERED MOST OF THE BITCOIN THAT HAD BEEN STOLEN FROM
WALLETS CONTROLLED BY THE COUPLE WHO HAVE BEEN CHARGED WITH MONEY LAUNDERING AND
FRAUD.

Getty Images/iStockphoto
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BTCUSD
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WMT
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The U.S. Department of Justice announced Tuesday that it had executed its
largest financial seizure in history, recovering $3.6 billion worth of bitcoin
BTCUSD, -2.11% stolen in a 2016 hack of the currency exchange Bitfinex.

A husband and wife with a background as tech entrepreneurs in blockchain
technology were arrested for their alleged role in the theft.

Prosecutors said they had managed to trace the stolen money — nearly 120,000
bitcoins — through an intricate web of transactions done to hide its origins, to
a number of crypto-wallets controlled by Ilya Lichtenstein, 34, and his
31-year-old wife, Heather Morgan.


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The pair were arrested Tuesday morning in Manhattan and were scheduled to appear
in court later in the day on charges of conspiracy to commit money laundering
and to defraud the U.S. government, authorities said. They have not been charged
with perpetrating the hack itself.

The couple couldn’t immediately be reached for comment, and it wasn’t clear if
they had yet retained attorneys.

Lichtenstein, who went by the name “Dutch” is a dual U.S. and Russian citizen,
prosecutors said. In her LinkedIn profile, Morgan described herself as a serial
entrepreneur originally from California, and an “irreverent comedic rapper.” She
is also a writer who had contributed articles to Inc. and Forbes.



Not all of the bitcoin stolen in the 2016 hack has been recovered and the
investigation is ongoing, prosecutors said. When the hack occurred, the bitcoin
was worth approximately $71 million. Today, it would be worth $4.5 billion, they
said.

“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,” said assistant Attorney General Kenneth Polite of the Justice
Department’s Criminal Division. “The arrests today show that we will take a firm
stand against those who allegedly try to use virtual currencies for criminal
purposes.”

According to investigators, when the 2016 hack occurred, the money was moved out
from Bitfinex in 2,000 separate transactions to wallets on other platforms.
Initially, much of the money was placed in accounts on the dark net platform
Alpha Bay, but then moved again into dozens of accounts all over the world.

Alpha Bay was shut down by authorities in 2017 for harboring illicit activity,
but prosecutors said key evidence was recovered that allowed them to follow the
trail of the stolen money from the Bitfinex hack.



The trail ultimately led investigators to Lichtenstein and Morgan. A search
warrant ultimately gave investigators access to a cloud-computing account
belonging to the couple, where the keys to the various blockchain wallets they
held were found.

The accounts were accessed and the money seized last week, prosecutors said.

Prosecutors say the couple had been slowly laundering the money, having moved
about 25,000 of the coins into regular cash currencies, gold and to purchase
non-fungible tokens. Some of the money was used to purchase Walmart WMT, +0.48%
gift cards which were, in turn, used to buy ordinary items.

According to court documents, the couple used a variety of methods to obscure
the origins of the money, including opening accounts in fake names, moving coins
from wallet to wallet in small transactions and moving the money from one type
of coin to another.

Prosecutors said they would ultimately move to return the seized money back to
those it was stolen from in 2016.

In a statement, Bitfinex said it had been cooperating with authorities all along
and will work with the Department of Justice to return the money.

“We want to express our appreciation for the dedication and hard work by the DOJ
team that led to this great success. We will continue to support their efforts,”
the company said.


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FEDS ARREST COUPLE AND RECOVER $3.6 BILLION IN BITCOIN STOLEN IN 2016 FROM
BITFINEX — THE LARGEST GOVERNMENT SEIZURE IN HISTORY

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‘IF YOU’RE A WAGE EARNER YOU’RE GOING TO FALL BEHIND’: EX-FED INSIDER WARNS OF
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INTEREST RATES ARE SET TO RISE. HERE ARE 3 EQUITY SECTORS TO CONSIDER

APPLE WILL LET MERCHANTS ACCEPT IN-PERSON PAYMENTS WITH ONLY AN IPHONE


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ABOUT THE AUTHOR

Lukas I. Alpert


Lukas covers financial crime for MarketWatch. You can follow him on
Twitter @lalpert1.



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