Justice Department Seizes Over $3.6 Billion Worth of Bitcoin Linked to Bitfinex Hack

The U.S. Justice Department has seized $3.6 billion worth of Bitcoin, marking the largest seizure of cryptocurrency of all time and the biggest financial seizure ever.

In a statement, the Justice Department says it seized over 119,754 BTC from 34-year-old Ilya Lichtenstein, and his wife, 31-year old Heather Morgan.

The Bitcoin seized by the feds was directly linked to the Bitfinex hack of 2016 when the crypto exchange experienced the biggest digital asset hack in history.

According to court documents seen by the Justice Department, Lichtenstein and Morgan allegedly attempted to launder Bitcoin that was stolen from Bitfinex after a hacker breached the exchange’s systems, and then sent the stolen crypto to a wallet under Lichtenstein’s control in over 2,000 unauthorized transactions.

“Over the last five years, approximately 25,000 of those stolen bitcoin were transferred out of Lichtenstein’s wallet via a complicated money laundering process that ended with some of the stolen funds being deposited into financial accounts controlled by Lichtenstein and Morgan.

The remainder of the stolen funds, comprising more than 94,000 bitcoin, remained in the wallet used to receive and store the illegal proceeds from the hack. After the execution of court-authorized search warrants of online accounts controlled by Lichtenstein and Morgan, special agents obtained access to files within an online account controlled by Lichtenstein.”

The Department says that the files seized by the agents contained the private keys required to access the alleged money launderers’ crypto wallets and recover the BTC.

After allegedly getting ahold of the stolen Bitcoin, the feds say that Lichtenstein and Morgan used a series of complex strategies to try and obfuscate their digital paper trail, including sending the crypto to darknet markets, utilizing fake identities, and using US-based business accounts to legitimize their banking activity.

Last week, the stolen BTC was spotted moving around the blockchain in a flurry of massive transactions. Currently, it’s unclear whether that activity was related to the US government seizing the Bitcoin.

The two suspects are charged with conspiracy to commit money laundering, a crime that carries a maximum sentence of 20 years in prison, plus conspiracy to defraud the United States, which carries a maximum sentence of five years in prison.

FBI Deputy Director Paul M. Abbate warns aspiring crypto money launderers that US authorities have the ability to prevent illicit digital activity.

“Criminals always leave tracks, and today’s case is a reminder that the FBI has the tools to follow the digital trail, wherever it may lead…Thanks to the persistent and dedicated work of our FBI Investigative teams and law enforcement partners, we’re able to uncover the source of even the most sophisticated schemes and bring justice to those who try to exploit the security of our financial infrastructure.”

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DoJ Seizes $3.6B in Bitcoin From 2016 Bitfinex Hack

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The $3.6 billion sum makes it the Department of Justice’s largest financial seizure in history. 

DoJ Recovers Funds From Bitfinex Hack

U.S. officials have just confirmed the largest crypto seizure ever. 

The Department of Justice announced Tuesday that it had confiscated $3.6 billion in Bitcoin that was stolen from the Bitfinex exchange in 2016. 

It added that a New York couple had been arrested in connection to the Bitfinex hack and charged with alleged conspiracy to launder stolen cryptocurrency with a current value of $4.5 billion. The two individuals, Ilya Lichtenstein, 34, and his wife Heather Morgan, 31, have also been charged with alleged conspiracy to defraud the United States. They could face up to 25 years in prison if convicted. 

Discussing the seizure in a press release, Deputy Attorney General Lisa O. Monaco said that the incident was proof that “cryptocurrency is not a safe haven for criminals.” She criticized Lichtenstein and Morgan for their “futile effort to maintain digital anonymity” and added that the Department of Justice “can and will follow the money, no matter what form it takes.” 

Court documents allege that the couple conspired to launder funds from 119,754 Bitcoin that were stolen from Bitfinex in August 2016. A hacker compromised Bitfinex’s platform and sent over 2,000 unauthorized transactions and allegedly transferred the stolen Bitcoin to a wallet Lichtenstein had access to. 

The filings state that around 25,000 Bitcoin have gradually been moved from the digital wallet Lichtenstein controlled to other locations over the last five years, all of which Lichtenstein and Morgan control. The documents state that special agents accessed Lichtenstein’s files and uncovered the private key to the wallet the stolen Bitcoin was originally transferred to, meaning they had a way to access the remaining 94,000 Bitcoin. 

In a statement, Bitfinex said it would continue to cooperate with the Department of Justice and follow the necessary steps to get access to some of the proceeds from the 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 note read. 

Lichtenstein and Morgan are due to appear in court today. 

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US Government Takes Aim at NetWalker Ransomware Attacks

Federal prosecutors struck back at a favorite tool of the ransomware community Wednesday, indicting one alleged NetWalker user, a Canadian national named Sebastien Vachon-Desjardins, on wire fraud, hacking and network extortion charges, and coordinating the takedown of a victim guidebook hosted on the darkweb.

The action, which included assistance from Bulgarian authorities, is the federal government’s first public assault against a malicious software that’s booming in popularity. Ransoms against schools, hospitals, businesses and governments netted NetWalker attackers tens of millions of dollars in 2020.

NetWalker burrows into and encrypts victim computers, only releasing its hold once victims pay a ransom – usually in bitcoin. It follows the ransomware-as-a-service model, making the individual hackers (affiliates) who deploy the attack, lock down the computer and demand the ransom akin to franchisees who share their profits with corporate (the ransomware developer).

Sebastien Vachon-Desjardins is alleged to have been one such affiliate. Prosecutors said he held a Florida-based company’s computers hostage with NetWalker in violation of federal law. Prosecutors also demanded forfeiture of $27 million accrued through his alleged ransomware crimes.

Vachon-Desjardins mounted at least 91 NetWalker heists from April 2020 onward, blockchain tracing company Chainalysis said, citing government partners. In a Wednesday blog the firm said Vacho-Desjardins associated wallet addresses have allegedly banked more than $14 million in bitcoin since February 2018, a trove now worth $27 million.

Chainalysis CSO Jonathan Levin told CoinDesk Vachon-Desjardins’ transactions offend a window into the workings of the underground ransomware economy. Chainalysis has followed $46 million in illicit ransomware bitcoin flows since 2019.

“The transparency of the blockchain really enables you to see not only the affiliates that are dealing with NetWalker, but also the affiliates that are actually using the other ransomware-as-a service strains, and so we can see links between different ransomware strains, via common affiliates of the different strains,” he said.

NetWalker attacks are unlikely to abate with the removal of a single affiliate, he said.



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