The US Justice Dept. arrests the pair behind a colossal crypto heist

In "the department’s largest financial seizure ever".
Brad Bergan
A physical Bitcoin (left), and the US Supreme Court (right).1, 2

The sun may be setting on the wild west of colossal crypto heists.

The U.S. Justice Department has placed two people under arrest for allegedly laundering (stealing) bitcoin worth more than $3.6 billion over a five-year span, according to a press Tuesday release on the branch's website.

Crucially, this is "the department's largest financial seizure ever," which means that, if the duo is found guilty, it could mark a major turning point in the history of bitcoin transactions — where federal branches forces begin to gain traction against the biggest crypto heists.

The pair placed under arrest are married; Heather Morgan, and Ilya "Dutch" Lichtenstein, and are slated to appear in court at 3:00 PM EST in New York, according to the press release.

The end of crypto hacker anonymity?

The two people were arrested on Tuesday morning in Manhattan, New York, for reportedly stealing a massive sum of $3.6 billion in cryptocurrency during the 2016 Bitfinix hack. Bitfinix is a virtual currency exchange valued at roughly $4.5 billion, which means the level of the heist represented a serious blow to the exchange. Of the record-breaking seizure of stolen bitcoin, Lisa O. Monaco, Deputy Attorney General at the Department of Justice (DOJ) said it shows "that cryptocurrency is not a safe haven for criminals", according to the press release.

Arguing that the end is near for digital hackers' reliance on anonymity, Monaco 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." This comes six years after the 2016 hack, when roughly 120,000 BTC was stolen — worth roughly $60 million at the time, and comprising one-sixth of bitcoin trading volume that year. Notably, the language in the DOJ release doesn't say for certain that the married crypto duo were the original hackers behind the heist.

Most Popular

But it went down like this: "Unauthorized transactions" transferred the massive chunk of bitcoin into Lichtenstein's wallet, with roughly 25,000 taken out piece-meal over five years. As of the arrest, roughly 94,000 BTC was still in Lichtenstein's wallet. "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," continued the DOJ press release. "Those files contained the private keys required to access the digital wallet that directly received the funds stolen from Bitfinix, and allowed special agents to lawfully seize and recover more than 94,000 bitcoin that had been stolen from Bitfinex."

The married bitcoin thieves had professional careers

"The recovered bitcoin was valued at over $3.6 billion at the time of seizure," said the DOJ release. The stolen bitcoin was tracked on the BTC blockchain, with the funds from the hack moved from the initial recipient wallet to wallets the DOJ says are owned by Lichtenstein and Morgan, according to a statement of facts on the arrest. The original recipient's wallet, called Wallet 1CGA4s, was identified after a file "saved to Lichtenstein's cloud storage account" — which contained 2,000 wallet addresses (and private keys) — were decrypted, according to the statement. LinkedIn profiles of Dutch Ilya Lichtenstein and Heather R. Morgan suggest the duo were employees of SalesFolk since 2009 and 2014, respectively. The former's LinkedIn account also says she used to be a columnist at Forbes and Inc. Magazine, with Lichtenstein listed with a former role at Endpass, 500 Startups, and MixRank.

Bitcoin hacks may never be the same - The significance of Tuesday's arrest can't be overstressed: two people (who were married!) are being linked to the colossal 2016 Bitfinex crypto hack, and arrested by the DOJ with nearly $4 billion in bitcoin seized. And it's the biggest financial seizure ever seen in the U.S. This could fundamentally shift the strategy of future bitcoin hackers, as federal agents hone their 21st-century sleuthing kills to the tricky craft of digital thieves.

This was a breaking story and was regularly updated as new information became available.

message circleSHOW COMMENT (1)chevron