The U.S. Justice Department announced on Tuesday that it had recovered more than 94,000 bitcoins stolen in 2016 from Bitfinex, the virtual currency exchange, and valued them today at USD 3.6 billion, a record sum for a judicial seizure. A couple in their thirties from New York, charged with laundering some of the bitcoins stolen via complex cryptocurrency transactions, was arrested Tuesday morning in Manhattan, NYC.
Ilya Lichtenstein, 34, who holds both Russian and American citizenship, and his wife Heather Morgan, 31, a Forbes contributor who presented herself as an entrepreneur.
In August 2016, a hacker broke into the systems of the Hong Kong-based Bitfinex platform and made more than 2,000 unauthorized transactions, stealing nearly 120,000 bitcoins from its customers, a sum estimated to be worth more than USD 71 million the time. According to prosecutors, the virtual currency then ended up on a digital wallet controlled by Ilya Lichtenstein, a Russian-American who, on social networks, presents himself as a “tech entrepreneur, coder, and investor”. At this stage, he is not charged with the hacking, but subsequent charges remain possible.
His wife uses the alias “Razzlekhan” according to court documents. Under this pseudonym, she has posted several rap videos, where she describes herself as the “crocodile of Wall Street”.
In five years after the theft, 25,000 bitcoins have been moved from the wallet controlled by Ilya Lichtenstein through “a maze of cryptocurrency transactions” and partly landed in accounts opened by the couple online, including by impersonating false identities. They mixed “old techniques and very complex transactions”, commented a prosecutor during a press briefing.
According to U.S. authorities, these funds were mostly utilized to purchase gold and NFTs (non-fungible tokens). The rest, now valued at USD 3.6 billion given the rise in Bitcoin’s price, was recovered last week by investigators. Armed with a warrant, the authorities had gone through the couple’s online accounts and recovered the security key giving access to the wallet.
The virtual currency exchange, Bitfinex had offered a multimillion-dollar reward for any information leading to the stolen funds, but the Justice Department declined to say whether it played a role in the couple’s arrest.
The authorities called on the victims of the initial theft to come forward, in order to initiate the process of recovering the funds. The investigation is continuing, they said, without wanting to comment on the mastermind behind the initial hack.
Bitcoin, a virtual currency, has only existed since 2008 and has since experienced significant price fluctuations. It attracts big names in finance but also allows, according to the authorities, criminal networks to make their financial flows more opaque. This file “shows that the police are able to follow the trail of money through the blockchain and that we will not let the cryptocurrencies become a lawless zone,” commented Kenneth Polite, a senior Justice Department official.