DOJ seizes $3.6B in bitcoins after busting entrepreneur couple in Bitfinex laundering scheme

DOJ seizes $3.6B in bitcoins after busting entrepreneur couple in Bitfinex laundering scheme

The U.S. Justice Department (DOJ) has seized over 94,000 bitcoins that were allegedly stolen in the 2016 hack of crypto exchange Bitfinex and arrested a married couple suspected to have laundered the money, the department announced today. The couple — Ilya Lichtenstein, 34, and Heather Morgan, 31 — faces charges of conspiring to launder money and to defraud the U.S. government. Facing up to 25 years in prison if convicted, they are set to make their initial appearance in federal court in Manhattan later today.

The asset seizure, worth $3.6 billion at today’s bitcoin prices, is the largest in the Justice Department’s history, officials said. They did not recover the entire sum of funds lost in the 2016 hack, though — the 119,754 bitcoins allegedly stolen in total are now worth $4.5 billion.

While Morgan and Lichtenstein were not formally accused of perpetrating the hack, prosecutors said they discovered the suspects because the bitcoins were sent to a digital wallet Lichtenstein controlled. The couple obtained the coins after a hacker breached Bitfinex’s systems, initiating more than 2,000 illegal transactions, the DOJ said.

Lichtenstein and Morgan are both deeply involved in the tech startup ecosystem, according to their LinkedIn profiles. Lichtenstein, a dual citizen of the U.S. and Russia who goes by the nickname “Dutch,” founded a Y Combinator-backed sales software company called MixRank. Morgan is the founder and CEO of B2B sales startup SalesFolk, where Lichtenstein has served as an advisor since 2014, according to data from Crunchbase and LinkedIn. Lichtenstein 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.

Over 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.

Bitfinex said in a statement today that it would work together with U.S. officials to attempt to return the stolen funds to their rightful owners.

“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 DOJ’s criminal division said in the agency’s statement.

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