By Eric Tucker
The Justice Department announced Tuesday its largest-ever financial seizure — more than $3.6 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.
Federal law enforcement officials said the recovered sum was linked to the hack of Bitfinex, a virtual currency exchange whose systems were breached by hackers nearly six years ago.
Ilya “Dutch” Lichtenstein, a citizen of Russia and the United States, and his wife, Heather Morgan, were arrested in Manhattan on Tuesday morning, accused of relying on various sophisticated techniques to launder the stolen money and conceal the transactions. They face federal charges of conspiracy to commit money laundering and conspiracy to defraud the United States. It was unclear if they had lawyers or people who could speak on their behalf.
They were in custody pending an appearance in Manhattan's federal court later Tuesday.
“The message to criminals is clear: Cryptocurrency is not a safe haven. We can and we will follow the money, no matter what form it takes,” Deputy Attorney General Lisa Monaco said in a video statement released by the Justice Department.
The couple was not charged in the Bitfinex hack itself, during which a hacker was able to initiate more than 2,000 unauthorized bitcoin transactions. About $71 million in stolen bitcoin — valued today at more than $4.5 billion — was transferred to an outside digital wallet, officials said.
Investigators using what Monaco described as “old-fashioned police work" located a wallet containing more than 2,000 bitcoin accounts and followed the trail to accounts at a dark web criminal marketplace called AlphaBay that was dismantled by the Justice Department in 2017.
Authorities say they ultimately traced the stolen funds to more than a dozen accounts that were controlled by Lichtenstein, Morgan and their businesses. Court documents accuse them of relying on classic money-laundering techniques to hide their activities and the movement of the money, such as setting up accounts with fictitious names using computer programs to automate transactions.
Millions of dollars of the transactions were cashed out through bitcoin ATMs and used to purchase gold and non-fungible tokens as well as more mundane items like Walmart gift cards for personal expenses, prosecutors said.
Justice Department officials say that though the proliferation of cryptocurrency and virtual currency exchanges represent innovation, the trend has also been accompanied by money laundering, ransomware and other crimes. The Justice Department last year announced the formation of the National Cryptocurrency Enforcement Team in recognition of the trend.
“Today’s arrests, and the Department’s largest financial seizure ever, show that cryptocurrency is not a safe haven for criminals,” Monaco said in a statement. “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 the form it takes.”
Updated on February 8, 2022, at 6:19 p.m. ET with additional details.
