Justice Department announces seizure of $3.6 billion in laundered cryptocurrency, 2 arrests (2024)

FAQs

Justice Department announces seizure of $3.6 billion in laundered cryptocurrency, 2 arrests? ›

WASHINGTON (AP) — The Justice Department announced Tuesday its largest-ever financial seizure — more than $3.5 billion — and the arrests of a New York couple accused of conspiring to launder billions of dollars in cryptocurrency stolen from the 2016 hack of a virtual currency exchange.

Heather Morgan and Ilya Lichtenstein were arrested last year in New York after police traced their riches back to the crypto heist. While evading police, Morgan masqueraded as a rapper and tech entrepreneur. As part of a plea deal, Lichtenstein admitted he was behind the hack.

Ilya Lichtenstein's testimony helped shed more light on the motives behind the 2016 Bitfinex hack and how he managed to launder millions of dollars. A hacker who looted billions of dollars from crypto exchange Bitfinex revealed details of how he was able to pull off one of largest Bitcoin heists in history.

Bitcoin seizure is the process by which the government legally dispossesses a citizen of bitcoin. Bitcoin is seizure-resistant and can only be seized by obtaining the private key to a bitcoin address. Assuming probable cause, bitcoin which funds or facilitates criminal activity will be subject to government seizure.

In 2016, Bitfinex reported that hackers stole 1,19,000 coins, then worth $70 million. The Department of Justice in the United States of America recovered 94,000 coins and arrested a couple identified as Heather Morgan and Ilya Lichtenstein.

Mt. Gox remains the greatest cryptocurrency robbery in history, with over 850k Bitcoin stolen between 2011 and 2014. Mt. Gox claimed that a fault that caused the loss is due to an underlying bug in Bitcoin, known as transaction malleability.

Applications (software) and devices can be hacked. Because private keys are stored in applications and device wallets, hackers can access them and steal your cryptocurrency.

Billionaires with largest net worth drop due to global crypto crash in 2022. Binance founder and CEO Changpeng Zhao (commonly known as CZ) was the crypto billionaire who lost the most money following the crypto crisis of 2022, with a net worth drop amounting to 82 billion U.S. dollars.

James "Jimmy" Zhong is an American man who was convicted in 2022 for stealing over 51,680 bitcoin (then worth about $620,000; value as of 2023 approximately $3.4 billion) from the online black market Silk Road between 2012 and 2014.

Satoshi Nakamoto is the name used by the presumed pseudonymous person or persons who developed Bitcoin, authored the Bitcoin white paper, and created and deployed Bitcoin's original reference implementation.

What does FBI do with seized Bitcoin? ›

Seized cryptocurrencies are typically held in this way until a court verdict is reached. If the defendant is acquitted, the assets are returned; if convicted, the asset forfeiture is part of the defendant's sentencing.

According to the site, the FBI seized millions of dollars in cryptocurrency, the majority of which was in ETH and Ethereum-based Layer 2 assets and stablecoins.

The bitcoins are typically sold off in public auctions conducted by the U.S. Marshals Service, which is a law enforcement agency within the Department of Justice. At least $1 billion worth of digital coins and possibly much more has spent time in the custody of U.S. law enforcement.

In a hearing before U.S. District Judge Colleen Kollar-Kotelly in Washington, Moscow-born U.S. citizen Ilya Lichtenstein admitted to hacking the exchange and enlisting his wife, an online rapper named Heather Morgan who has gone by the alias "Razzlekhan," to help conceal some 119,754 stolen bitcoin.

Heather Morgan and Ilya Lichtenstein went to desperate lengths in their attempts to convert billions of dollars worth of cryptocurrency into cash. At the time of their arrest in 2022, the stash of 120,000 Bitcoin was worth $4.5bn (£3.5bn).

The couple was eventually caught after the FBI was able to track some of the stolen bitcoin to a digital wallet that was controlled by Lichtenstein. The FBI also found evidence of the couple's money laundering activities on their computers.

She was released on bail on 14 February 2022, and convicted on 3 August 2023.

Lichtenstein pleaded guilty to conspiracy to commit money laundering, which carries a maximum penalty of 20 years in prison. Morgan pleaded guilty to one count of money laundering conspiracy and one count of conspiracy to defraud the United States, each of which carries a maximum penalty of five years of in prison.

But the system configuration was flawed. The limit could be changed with a computer command sent by someone with a Bitfinex executive's electronic credentials. That's what the hackers did after first using a “remote-access Trojan” to infiltrate the exchange, according to court documents.