US authorities have arrested two people on charges of conspiring to launder $4.5 billion—yes, billion—in cryptocurrency that was stolen during the 2016 hack of the cryptocurrency exchange Bitfinex.
Ilya Lichtenstein and his wife Heather Morgan conspired to launder the proceeds of nearly 120,000 stolen bitcoin, according to court documents cited by the DOJ, which were transferred to a digital wallet controlled by Lichtenstein. Since the initial hack, roughly 25,000 bitcoin have been transferred out of that wallet and laundered through a complex series of transactions, with the resulting funds deposited into conventional accounts owned by Lichtenstein and Morgan.
The scheme went off the rails in January, though, after federal agents were able to access and decrypt a file stored in Lichtenstein's cloud storage account that provided a list of more than 2,000 virtual currency addresses and keys. Further analysis confirmed that nearly all of the addresses were directly linked to the hack; more than 94,000 bitcoin were subsequently seized. The bitcoin was valued at more than $3.6 billion at the time of seizure, making it the largest financial recoveryin DOJ history.
"Today, federal law enforcement demonstrates once again that we can follow money through the blockchain, and that we will not allow cryptocurrency to be a safe haven for money laundering or a zone of lawlessness within our financial system," assistant attorney general Kenneth A. Polite Jr. said in a statement. "The arrests today show that we will take a firm stand against those who allegedly try to use virtual currencies for criminal purposes."
The DOJ complaint also includes several charts illustrating how the scheme was perpetrated. The charts are simplified and difficult to read in spots, but provide an idea of the scale and complexity of the money laundering operation:
In a separate statement, Bitfinex said it has been "cooperating extensively" with the DOJ since the investigation began, and will continue to do so following the arrests. It's also working to "establish our rights to a return of the stolen bitcoin."
Lichtenstein's LinkedIn bio describes him as a "technology entrepreneur, coder and investor [who is] interested in blockchain technology, automation, and big data." It also lists him as the founder of Endpass, a blockchain-based "decentralized identity platform." The site is currently offline, but still visible via the Wayback Machine.
Morgan's pre-arrest life appears to be somewhat more colorful. She's apparently also known as Razzlekhan, a rapper who self-describes as "like Genghis Khan, but with more pizzazz."
Here's the video for her 2019 release Versace Bedouin:
"Razz is not just a rapper. She is also a software CEO, a writer, an economist, and a few contradictory other things (listen to find out)," the razzlekhan.com website says. "While Razz has many rappers that she is inspired by, including South African rap duo Die Antwoord, Tierra Whack, and rapper Mickey Avalon, she also finds great inspiration of the creative works of Salvador Dali, Diane Arbus, Hunter S Thompson, Roald Dahl, and Charles Bukowsky."
She also dispenses financial advice from time to time.
lol she has a TikTok https://t.co/VITAoQeFwy pic.twitter.com/MVZmM1bYBQFebruary 8, 2022
Lichtenstein and Morgan are facing up to 20 years in prison for conspiracy to commit money laundering, as well as charges of conspiracy to defraud the US government, which carries a maximum sentence of five years. Their initial court appearance took place today.