Emily Walker
Ilya Lichtenstein, who admitted guilt in connection with the 2016 Bitcoin theft from the Bitfinex exchange, has received a five-year prison sentence, as announced by the US Department of Justice (DOJ) on Thursday.
His sentence stems from his participation in a money laundering scheme involving the theft of around 120,000 Bitcoins.
Uncovering the Bitcoin Theft and Laundering Scheme
Legal filings indicate that Lichtenstein exploited advanced hacking tools to infiltrate Bitfinex’s system. After gaining access, he wrongfully approved more than 2,000 transactions, funnelling 119,754 Bitcoin into a wallet he managed.
To avoid detection, Lichtenstein took steps to erase evidence by deleting access credentials and logs that could reveal his actions to authorities. He later involved his wife, Heather Morgan, in the process of laundering the stolen assets.
The DOJ described the laundering methods utilized by Lichtenstein and Morgan as “highly complex.” They created fake identities to set up online profiles, automated their transactions, and funneled the hijacked funds into various accounts related to darknet markets and cryptocurrency platforms.
Additionally, they practiced “chain hopping” — converting Bitcoin into other cryptocurrencies to mask its source. They also employed cryptocurrency mixing services to further obfuscate the stolen funds and even traded some of the Bitcoin for gold coins.
On August 3, 2023, both Lichtenstein and Morgan confessed to conspiracy charges related to money laundering. Alongside the prison term, Lichtenstein has been sentenced to three years of supervised release. Morgan’s sentencing is set for November 18.
Bitfinex Recognized as the Main Victim in the BTC Theft
Recently, a US District Court in the District of Columbia ruled in favor of Bitfinex, declaring it the only entity entitled to compensation for the nearly 120,000 BTC taken eight years prior.
This ruling has led the US government to formally identify Bitfinex as the primary victim of the event, while acknowledging that “many individuals and groups” might also have suffered due to the theft.
Despite this recognition, the government is struggling to identify all impacted users. To address this, efforts are being made to utilize the Department of Justice’s new website focused on “large cases.”
This upcoming platform will offer “important notifications” and simplify the process for individuals to file claims regarding their losses.
Although these individuals are not categorized as “victims” under current legal terms, the government aims to provide a means for them to assert their claims through alternative notification approaches.
As of this writing, Bitcoin, the leading cryptocurrency, is valued at $88,520, experiencing a 16% increase over the week, although it has slightly declined in the last 48 hours from its recent peak of $93,250 reached on Wednesday.
Featured image from DALL-E, chart from TradingView.com