FBI arrests couple suspected of laundering $4.5bn from Bitfinex hack

Washington — The Federal Bureau of Investigation (FBI) arrested a husband and wife on Tuesday morning, alleging they conspired to launder cryptocurrency stolen from the 2016 hack of virtual currency exchange Bitfinex, and said law enforcement has already seized more than $3.6bn in cryptocurrency tied to the hack.

The action represents the justice department’s largest-ever financial seizure, deputy attorney-general Lisa Monaco said, adding in a statement that it shows cryptocurrency is “not a safe haven for criminals”.

The August 2016 Bitfinex hack was one of the largest ever recorded — so huge that news of the theft knocked 20% off bitcoin’s value at the time.

Ilya “Dutch” Lichtenstein and his wife Heather Morgan, both of Manhattan, are scheduled to make their initial appearances in federal court on Tuesday at 3.00pm in a New York court.

The case was filed in a federal court in Washington, DC.

It was unclear who will be representing the couple in the criminal case. Calls and messages left for Lichtenstein were not immediately returned.

The pair is accused of conspiring to launder 119,754 bitcoin that was stolen, after a hacker attacked Bitfinex and initiated more than 2,000 unauthorised transactions.

Department officials said the transactions at the time were valued at $71m in bitcoin, but with the rise in the currency’s value, it is now valued at over $4.5bn.

“As the complaint alleges, the FBI and federal prosecutors were able to trace the movement of bitcoin from this hack,” said Matthew Graves, the US attorney for the District of Columbia.

He added that the money moved through a major darknet exchange tied to a host of crimes, as well as cryptocurrency addresses tied to child sexual abuse materials.

Lichtenstein and Morgan are facing charges of conspiring to commit money laundering, as well as to defraud the US.

Prosecutors said on Tuesday the illegal proceeds were spent on a variety of things, from gold and non-fungible tokens to “absolutely mundane things such as purchasing a Walmart gift card for $500".

Bitfinex said in a statement that it was to working with the department to “establish our rights to a return of the stolen bitcoin”.

Tuesday’s criminal complaint came more than four months after Monaco announced the department was launching  a new National Cryptocurrency Enforcement Team, which is comprises a mix of anti-money laundering and cybersecurity experts.

Cyber criminals who attack companies, municipalities and individuals with ransomware often demand payment in the form of cryptocurrency.

In one high-profile example in 2021, former partners and associates of the ransomware group REvil  caused a widespread gas shortage on the US east coast when it used encryption software called DarkSide to launch a cyberattack on the Colonial Pipeline.

The department later recovered about $2.3m  in cryptocurrency ransom that Colonial paid to the hackers.

Cases like these demonstrate that the justice department “can follow money across the blockchain, just as we have always followed it within the traditional financial system”, said Kenneth Polite, assistant attorney-general of the department’s criminal division.

Reuters