In one of the craziest developments in crypto history, US federal agents arrested a husband and wife couple this week for attempting to launder 120,000 stolen Bitcoin – the Bitcoin that was hacked from Bitfinex in 2016. This 120,000 Bitcoin equates to roughly $3.6B, which is the largest financial seizure by the Feds ever. At the time of the theft, the Bitcoin was only worth $71M.
Ilya Lichtenstein, 34, was a tech company founder who attended the top startup accelerator, YCombinator, in 2011 with his company MixRank. MixRank automates sales lead-generation. He has dual citizenship in the US and Russia.
How They Were Found
After Bitfinex was hacked, the stolen Bitcoin was sent to thousands of wallets and moved in a sophisticated manner to avoid detection, eventually landing on a site called Alpha Bay. Alpha Bay was eventually shut down by the Feds for facilitating illegal actions, which in turn led to the information that set authorities on the trail of Lichtenstein and Morgan.
The bust happened when investigators obtained a search warrant for a cloud-computing account where the keys for the stolen Bitcoin were stored. (Not your servers, not your keys, apparently.) According to the Feds, the couple had successfully laundered ~25,000 Bitcoin up to that point, turning those funds into gold, NFTs, and Walmart gift cards. They had employed a variety of methods to move the money, part of which included creating fake identities.
It’s important to note that the couple was not charged with hacking the exchange, just with laundering the Bitcoins. This could simply be due to a lack of evidence, but there is some evidence in the exchange history that the hacker may be a separate party.
While it’s unclear who has the rights to the recovered Bitcoin, there will definitely be a battle for it. Bitfinex issued tokens to affected parties when the hack originally transpired, so according to them, users have been made whole. Given the price appreciation of Bitcoin relative to Bitfinex tokens, many people are going to want their original holdings back. Bitfinex has stated that they plan on using 80% of the recovered tokens to buy up and burn existing tokens, assuming they are directly given to them by the US.