Ilya Lichtenstein, 34, and his wife, Heather Morgan, 31, of New York City, were arrested Tuesday morning in Manhattan for an alleged conspiracy to launder cryptocurrency that was stolen during the 2016 hack of Bitfinex, a virtual currency exchange, presently valued at approximately $4.5 billion.
Thus far, law enforcement has seized over $3.6 billion in cryptocurrency linked to that hack.
“Today’s arrests, and the department’s largest financial seizure ever, show that cryptocurrency is not a safe haven for criminals,” Deputy Attorney General Lisa O. Monaco said in a statement.
She continued: “In a futile effort to maintain digital anonymity, the defendants laundered stolen funds through a labyrinth of cryptocurrency transactions. 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.”
Lichtenstein and Morgan face charges of conspiracy to commit money laundering and conspiracy to defraud the United States, which carry combined maximum sentencing periods of 25 years. The couple is scheduled to appear in a Manhattan federal court Tuesday at 3 p.m. EST.
The criminal complaint alleges that Lichtenstein and Morgan used different laundering techniques, including using fake identifies to set up online accounts; using computer programs to execute fast, automated transactions; depositing stolen funds in numerous crypto exchange accounts to cover transaction history; converting bitcoin to other forms of virtual currency; and using U.S.-based business accounts to make their funds seem legitimate.
“Cryptocurrency and the virtual currency exchanges trading in it comprise an expanding part of the U.S. financial system, but digital currency heists executed through complex money laundering schemes could undermine confidence in cryptocurrency,” U.S. Attorney Matthew M. Graves for the District of Columbia said in a statement.
According to court documents, a hacker allegedly laundered the proceeds of 119,754 bitcoin via 2,000 transactions on Bitfinex’s website over the course of five years and transferred those funds into Lichtenstein’s digital wallet.
About 25,000 of those bitcoin were then transferred out of that wallet through a complicated laundering process and into accounts controlled by both Lichtenstein and Morgan, the documents stated.
More than 94,000 bitcoin remained in Lichtenstein’s wallet used to store the illegal funds, according to the criminal complaint.
Special agents executed search warrants of the couple’s online accounts and accessed files containing the passwords to their digital wallet linked to the stolen Bitfinex funds, allowing agents to seize the stolen bitcoin valued at $3.6 billion at the time of the seizure.
They used their bitcoin to purchase gold and gift cards for personal expenses, authorities said.
“Bitfinex will work with the DOJ and follow appropriate legal processes to establish our rights to a return of the stolen bitcoin. Bitfinex intends to provide further updates on its efforts to obtain a return of the stolen bitcoin as and when those updates are available,” the cryptocurrency trading platform said in a Tuesday statement.
The DOJ is prioritizing returning the funds to victims.
In a 2015 YouTube video, Morgan can be seen interviewing Lichtenstein, when he was the CEO of a startup company called MixRank, and asking him about his success in earning $1 million in revenue in his first year running a startup.
Bitcoin, the world’s most-traded cryptocurrency, was valued at more than $43,000 per coin as of Tuesday afternoon.