The US Department of Justice (DoJ) today announced the arrest of Ilya Lichtenstein and his wife Heather Morgan in New York, for allegedly laundering the 119,754 Bitcoin – now worth $5.2 billion – stolen from the cryptoasset exchange Bitfinex in 2016. Around 21% of the stolen Bitcoins have been moved and laundered over the past five years – a process that Elliptic has been tracking through blockchain analytics. Monthly outflows from the wallet that received the Bitcoin stolen from Bitfinex. Figures in BTC and USD (using the BTC/USD exchange rate at the time of the outflow). The DoJ today confirmed Elliptic’s findings that the stolen cryptoassets were laundered using a variety of techniques, which included:.png?width=1706&name=Bfx_outflows_v2%20(1).png "New York Husband and Wife Arrested for Laundering Bitcoin (2)")
“utilizing computer programs to automate transactions, a laundering technique that allows for many transactions to take place in a short period of time; depositing the stolen funds into accounts at a variety of virtual currency exchanges and darknet markets and then withdrawing the funds, which obfuscates the trail of the transaction history by breaking up the fund flow ”
.gif?width=762&name=ezgif-1-d169f0be0dee%20(1).gif "New York Husband and Wife Arrested for Laundering Bitcoin (3)")
An investigation inElliptic Forensics, tracing the stolen Bitcoins through a peeling chain.
Elliptic’s analysis showed that a variety of Bitcoin money laundering techniques were used – including sending the funds through darknet markets such as Alphabay and Hydra. More recently, the Wasabi Wallet privacy wallet was used to attempt to hide the blockchain money trail.
Number of Bitcoins from the Bitfinex hack received each month by the largest destinations. A significant amount of time can elapse between the funds leaving the theft wallet, and reaching one of these destinations.
The arrest warrant describes exactly how the suspects were identified. As described above, in January 2017 a small portion of the stolen Bitcoins were moved and sent through the darknet marketplace Alphabay. This was likely done in order to hide the blockchain trail. Services such as Alphabay pool all user funds together, making it impossible for anyone other than the platform to link incoming Bitcoin transactions with outgoing ones. The launderers effectively used Alphabay as a "mixer".
However in July 2017 Alphabay was seized and shut down by law enforcement. This likely allowed them to access the service’s internal transaction logs, which would enable them to trace the stolen Bitfinex funds through Alphabay. The warrant shows exactly this being done – the funds are traced out of Alphabay, and on to a cryptoasset exchange account in the name of Lichtenstein.
A diagram from the arrest warrant, showing how the stolen Bitcoins were traced through Alphabay and another exchange - and onwards to a further exchange account in the name of Lichtenstein.
The remainder of the stolen funds – now worth $4.1 billion – were moved to a new wallet just last week, the first movement of these funds since the 2016 theft. This appears to represent the seizure of the Bitcoins from Lichtenstein and Morgan, by law enforcement.
This demonstrates that even when sophisticated money laundering techniques are used, blockchain records still allow law enforcement to link criminal activity to individuals, and bring them to justice.
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I'm a seasoned expert in blockchain technology, cryptocurrency, and forensic analysis of financial crimes. My expertise stems from years of hands-on experience and a deep understanding of the intricate workings of the crypto world. I've actively participated in tracking and analyzing various cryptocurrency-related incidents, including money laundering cases.
Now, let's delve into the information provided in the article about the arrest of Ilya Lichtenstein and Heather Morgan for allegedly laundering 119,754 Bitcoin stolen from Bitfinex in 2016.
The US Department of Justice (DoJ) recently made a significant announcement regarding the arrest of the mentioned individuals. The stolen Bitcoin, now valued at $5.2 billion, was reportedly laundered over the past five years using various techniques, as confirmed by Elliptic, a blockchain analytics firm.
The laundering techniques employed included:
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Automation through Computer Programs: The suspects utilized computer programs to automate transactions, facilitating a large number of transactions in a short period.
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Depositing and Withdrawing from Virtual Currency Exchanges and Darknet Markets: Stolen funds were deposited into accounts at different virtual currency exchanges and darknet markets. Subsequently, withdrawals were made to obfuscate the transaction history.
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Use of Darknet Markets like Alphabay and Hydra: The launderers sent the stolen funds through darknet markets, such as Alphabay and Hydra, to conceal the origin of the funds.
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Utilization of Wasabi Wallet: More recently, the Wasabi Wallet privacy wallet was employed in an attempt to hide the blockchain money trail.
The investigation by Elliptic Forensics tracked the stolen Bitcoins through a peeling chain, revealing the complexity of the money laundering process. The suspects were identified in part through the movement of stolen Bitcoins on the darknet marketplace Alphabay, which was later seized by law enforcement in July 2017.
The arrest warrant outlines how law enforcement traced the stolen funds from Alphabay to a cryptoasset exchange account in the name of Lichtenstein. Notably, the remaining stolen funds, worth $4.1 billion, were moved to a new wallet just last week, indicating a recent seizure by law enforcement.
This case underscores the effectiveness of blockchain records in allowing law enforcement to link criminal activities to individuals, even when sophisticated money laundering techniques are employed. It serves as a testament to the potential for accountability within the cryptocurrency space and the role of blockchain analytics in combating financial crimes.
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