A married couple from New York City, Ilya Lichtenstein and Heather Morgan, pleaded guilty to money laundering conspiracies related to the hack and theft of approximately 120,000 bitcoin from Bitfinex, a global cryptocurrency exchange. Lichtenstein, 35, and Morgan, 33, were arrested in February 2022 after the government seized around 95,000 of the stolen bitcoin from cryptocurrency wallets under their control. At the time of the seizure, the recovered funds were valued at approximately $3.6 billion. Since their arrests, the government has also seized another approximately $475 million tied to the hack.
According to court documents, Lichtenstein utilized advanced hacking tools and techniques to gain access to Bitfinex’s network. Once inside, he fraudulently authorized over 2,000 transactions, transferring 119,754 bitcoin from Bitfinex to a cryptocurrency wallet he controlled. To cover his tracks, Lichtenstein went back into Bitfinex’s network and deleted access credentials and log files that could have exposed him to law enforcement. Following the hack, Lichtenstein involved his wife, Morgan, in laundering the stolen funds.
Lichtenstein, sometimes with Morgan’s assistance, used various sophisticated laundering techniques, including setting up online accounts with fictitious identities, using computer programs to automate transactions, depositing the stolen funds into accounts at darknet markets and cryptocurrency exchanges before withdrawing them to obfuscate the trail, converting bitcoin to other forms of cryptocurrency, depositing a portion of the criminal proceeds into cryptocurrency mixing services, using U.S.-based business accounts to legitimize their banking activities, and exchanging a portion of the stolen funds into gold coins, which Morgan concealed by burying them.
Lichtenstein pleaded guilty to conspiracy to commit money laundering, which carries a maximum penalty of 20 years in prison. Morgan pleaded guilty to one count of money laundering conspiracy and one count of conspiracy to defraud the United States, each carrying a maximum penalty of five years in prison. The final sentence will be determined by a federal district court judge, considering the U.S. Sentencing Guidelines and other statutory factors.
In accordance with the usual practice in criminal forfeiture cases, there will be a formal process for third-party claimants to submit claims for any seized and forfeited property at the conclusion of the case, pursuant to Rule 32.2 of the Federal Rules of Criminal Procedure.
The announcement of the guilty pleas was made by Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division, U.S. Attorney Matthew M. Graves for the District of Columbia, Chief Jim Lee of the IRS Criminal Investigation (IRS-CI), Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division, and Special Agent in Charge Ivan J. Arvelo of Homeland Security Investigations (HSI) New York.
The case is being investigated by the IRS-CI Washington, D.C. Field Office’s Cyber Crimes Unit, FBI Chicago Field Office, FBI’s Virtual Assets Unit (VAU), and HSI New York, with assistance from the Ansbach Police Department in Germany.
This high-profile case highlights the ongoing challenges and risks associated with the use and security of cryptocurrencies. Hackers like Lichtenstein take advantage of vulnerabilities in cryptocurrency exchanges and employ advanced hacking techniques to steal significant amounts of digital assets. The incident also underscores the importance of robust cybersecurity measures for cryptocurrency exchanges and the need for proactive collaboration between law enforcement agencies and international partners to combat cybercrime and money laundering in the cryptocurrency space.
Law enforcement agencies, such as the IRS-CI and the FBI, are continuously adapting their investigative techniques to keep pace with rapidly evolving technology and criminal schemes. They are leveraging their expertise in combating traditional financial crimes to address the unique challenges posed by cryptocurrencies. The involvement of HSI New York and the assistance provided by the Ansbach Police Department demonstrate the global nature of cybercrime and the need for international cooperation to effectively combat it.
As the case moves forward, it will offer valuable insights into the investigation and prosecution of cryptocurrency-related crimes, setting precedents and contributing to the development of legal frameworks surrounding digital assets. The outcome of the sentencing will also serve as a deterrent to potential criminals in the cryptocurrency space.
Overall, this case serves as a reminder of the importance of vigilance and precaution when engaging in cryptocurrency transactions. Users must remain cautious and informed about the security risks associated with storing and transacting digital assets. Additionally, cryptocurrency exchanges must prioritize the implementation of robust security measures to protect their users’ funds and data. By actively addressing these challenges, the cryptocurrency industry can continue to grow and mature, fostering trust and confidence among users and regulators alike.
