Crypto couple pleads guilty to $4.5B Bitcoin-laundering scheme

Category: Blockchain Crypto
Posted by Content Team

New York resident Ilya “Dutch” Lichtenstein confessed Thursday to being the original hacker responsible for the 2016 Bitfinex cyberattack, a Bitcoin heist worth $4.5 billion.

According to a CNBC report, his wife, Heather Rhiannon Morgan, also pleaded guilty to two money laundering conspiracy charges and conspired to defraud the United States government during their hearings in a federal court in Washington, D.C.

Before Lichtenstein’s admission in court on Thursday, the hacker’s identity behind the Bitfinex cyberattack was not publicly known. The couple, however, was not charged in the hack itself.

“Lichtenstein used a number of advanced hacking tools and techniques to gain access to Bitfinex’s network.”

U.S. Department of Justice

Lichtenstein could face a maximum sentence of 20 years in prison for involvement in a conspiracy to commit money laundering. He has been held in custody without bail due to concerns about being a flight risk. He agreed to cooperate with federal investigators and will stay in jail until sentencing.

Meanwhile, Morgan could face up to five years in prison. She attended her husband’s plea hearing in the courtroom. Morgan was released on a $3 million bail since her arrest, as reported by CNBC.

Record seizure in DOJ history

At the time of the theft, Bitcoin’s value was only $70 million. Its value has surged over the years, reaching $4.5 billion.

In February 2022, during their arrest, the Department of Justice (DOJ) confiscated over 94,000 bitcoins out of the more than 119,000 that were stolen. The value of the confiscated crypto was around $3.6 billion at the time, setting a record as the largest confiscation in DOJ history.

Since their arrests, the government has seized another approximately $475 million tied to the hack,” the DOJ said in a press statement Thursday.

Bitfinex said it immediately tried to compensate its customers after the August 2016 hack. The crypto exchange also mentioned collaboration with the DOJ to identify the hackers, recover the stolen bitcoin and ensure justice was served. These efforts succeeded after seven years.

According to the DOJ’s statement, Lichtenstein used various advanced hacking tools and techniques to access Bitfinex’s network. He gained unauthorized access to its systems and facilitated over 2,000 fraudulent transactions, transferring 119,754 bitcoins to his crypto wallet.

Lichtenstein deleted access credentials and log files that might have exposed him to law enforcement to cover his tracks. After the hack, he involved Morgan in laundering the stolen Bitcoins.

Converting assets to gold coins, cash

At his plea hearing, Lichtenstein admitted to converting some assets into gold coins, and Morgan buried the gold coins at a location that the authorities now know.

It also came to light that Lichtenstein’s travels to Ukraine and Kazakhstan were to cash out the digital assets through Russian and Ukrainian intermediaries. He physically retrieved the cash from addresses in Russia and Ukraine and deposited it into U.S. accounts to access it while in New York City.

According to a charging document filed last month against the couple, Lichtenstein began moving “a portion of the stolen bitcoin” in early 2017 through “a series of small, complex transactions across multiple accounts and platforms.”

This tactic was used to conceal the path of the stolen funds, as per the filing by the U.S. Attorney’s Office for the District of Columbia.

In February 2018, Lichtenstein and Morgan set up an account for their Endpass company at a U.S. financial institution. They gave the institution false information that the main payments would come from software-as-a-service customer payments. In reality, they used the account to launder the proceeds from the Bitfinex hack.