Ilya Lichtenstein and his wife, Heather Morgan, were arrested in Manhattan on Tuesday morning and face federal charges of conspiracy to commit money laundering and conspiracy to defraud the United States.
“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 Monaco said in a statement.
“In a futile effort to maintain digital anonymity, the defendants laundered stolen funds through a labyrinth of cryptocurrency transactions.”
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 unauthorized transactions.
Those unauthorized transactions sent the stolen bitcoin to a digital wallet under Lichtenstein’s control.
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 Lichtenstein and Morgan.
According to DOJ, the couple used sophisticated techniques, including “using fictitious identities to set up online accounts; utilizing 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.”
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. After the execution of court-authorized search warrants of online accounts controlled by Lichtenstein and Morgan, 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 special agents to la^vfully seize and recover more than 94,000 bitcoin that had been stolen from Bitfinex.
The recovered bitcoin was valued at over S3.6 billion at the time of seizure.
Lichtenstein and Morgan face up to 20 years in prison for the money laundering charges they face. In addition, they face an additional sentence of up to five years for conspiracy to defraud the U.S., according to the Justice Department statement.