On Tuesday, the U.S. Department of Justice (DOJ) arrested two individuals that are accused of an “alleged conspiracy to launder” 94,636 bitcoins stolen from Bitfinex in 2016. Interestingly, both of the suspects are known individuals within the tech industry as Ilya Lichtenstein was the co-founder of Mixrank, a Y-Combinator backed startup and Heather Morgan was a writer for Forbes.
The Myriad of Mysterious Bitcoin Transfers From the 2016 Bitfinex Hack
The U.S. government announced the “largest cryptocurrency seizure to date” after the DOJ seized 94,636 bitcoins that were stolen in the August 2016 Bitfinex hack. On August 2, 2016, a hacker managed to breach Bitfinex and steal 120,000 bitcoin (BTC). Bitcoin’s price shuddered 24 hours after the breach losing 22% in USD value during the course of the aftermath. At first, Bitfinex talked about reimbursing customers with a bail-in haircut plan, which means traders would only get a fraction of losses.
Two weeks later after the 120,000 BTC was stolen, Bitfinex gave the crypto community an investigation update. Instead of following through with the haircut plan, Bitfinex introduced “recovery rights tokens,” in order to make amends with the customers who lost funds. The coins were called BFX tokens and by April 3, 2017, at 8 p.m. UST (4 p.m. EST), the crypto exchange revealed it had paid its debt in full. However, after this point in time, people stopped talking about the Bitfinex stolen bitcoins, but the addresses holding the coins were monitored.
In June 2019, the thieves moved 170 BTC and then 300 BTC in August 2019. On May 21, 2020, 30 coins from the Bitfinex hack started moving, and had been transferred once again to another unknown address. On June 11, 2020, hackers moved stolen Bitfinex coins, as they transferred 416 bitcoin to an unknown address. About a week later, the thieves moved 2,500 bitcoins and in October 2020, the hackers transferred 2,034 BTC to unknown wallets.
5,045 BTC was moved by the hackers on December 1, 2020, and then on April 14, 2021, thousands upon thousands of stolen Bitfinex bitcoins were transferred, and caught by blockchain parsers. But the most unusual move of them all was on February 1, 2022, when 94,643.29 bitcoin was consolidated into one address with no privacy-preserving tactics used. The moved bitcoins on February 1, represented 79.03% of the 119,756 BTC stolen on August 2, 2016.
Ilya Lichtenstein and Heather Morgan: The Duo Accused of Laundering Billions in Bitcoin Stolen From Bitfinex
Following the odd transfer, the DOJ announced on February 8, 2022, that it seized approximately 94,636 bitcoins and arrested two individuals. The accused Bitfinex bitcoin money launderers were Ilya Lichtenstein, 34, and his wife, Heather Morgan, 31. Both of the accused bitcoin launderers were well known in the tech community and did not hide their presence online. Lichtenstein was the co-founder and CEO of Mixrank, which is essentially a customer discovery platform that works with sales representatives. Mixrank and Lichtenstein managed to raise $1.5 million from Mark Cuban and other investors.
Lichtenstein had no problem with public appearances and speaking in interviews about his entrepreneurship. Lichtenstein’s wife Heather Rhiannon Morgan was also not shy and was a contributor at Forbes, and wrote articles about things like cybercriminals. Morgan had close to 5,000 Instagram followers and she considered herself a street rapper and was called “Razzlekhan.” While performing and acting as her alter ego Razzlekhan, she also called herself “the Crocodile of Wall Street,” and the musician published a dedicated website.
“Just like her fearless entrepreneurial spirit and hacker mindset, Razz shamelessly explores new frontiers of art,” the web portal razzlekhan.com says. In fact, links are littered all over the internet about Lichtenstein and Morgan, as they both had a lot of entrepreneurial spirit. Morgan’s Linkedin profile says she is a “Serial Entrepreneur, SaaS Investors, and Surrealist.” Lichtenstein studied psychology at the University of Wisconsin and worked for many marketing jobs. He also has a dual U.S. and Russian citizenship after living there during his youth. After Lichtenstein’s career at Mixrank, he allegedly worked for a “stealth security startup.” The duo’s marriage is fairly recent as well, as Morgan and Lichtenstein got married in November 2021.
In addition to working for a “stealth security startup,” Lichtenstein was an angel investor at Demandpath. According to the website, Demandpath is “a boutique micro-fund investing in the next generation of promising technologies.” When the duo was arrested in Manhatten, the DOJ said that “thanks to the meticulous work of law enforcement, the department once again showed how it can and will follow the money, no matter what form it takes.” However, the DOJ did not disclose how the couple originally obtained the funds.
The U.S. government also did not detail what will happen to the seized bitcoin (BTC), but it’s assumed the coins will be auctioned like prior seizures. While no one knows right now how Lichtenstein and Morgan first got involved with the Bitfinex hack bitcoins, the public is well aware that the duo did not hide or attempt to keep themselves secretive. The couple, who were married in November 2021, broke the news that they would wed in the summer months before the wedding.
“[Heather Morgan is my] best friend and the woman of my dreams,” Lichtenstein said at the time.
Currently, the couple remains in prison because court prosecutors say the duo “presents a serious risk of flight.” The court prosecutors’ filing claims Lichtenstein and Morgan may still possess 7,506 ill-gotten bitcoin (BTC). If true, that would leave $333.8 million using current BTC exchange rates at the duo’s disposal.
“The investigation also showed that Lichtenstein and his wife, Morgan, engaged in extraordinarily complex laundering of a portion of the stolen funds stored in wallet 1CGA4s,” the filing details. “Specifically, beginning in or around January 2017, a portion of the stolen BTC moved out of wallet 1CGA4s in a series of small, complex transactions across multiple accounts and platforms.” The Washington judge presiding over the case halted the couple’s chance at bail after the prosecutors filed the flight risk concerns.
What do you think about the couple accused of laundering the 94,636 bitcoin seized by the DOJ? Let us know what you think about this subject in the comments section below.
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