US seizes bitcoin worth $3.6B stolen in 2016 Bitfinex hack

• A US-based couple Ilya Lichtenstein and his wife Heather Morgan have been arrested 

• The two have been accused of laundering 119,754 bitcoin stolen in 2016

Tuesday recorded the largest financial seizure ever after the U.S. seized more than $3.6 billion in Bitcoin stolen during a 2016 hack of the Bitfinex currency exchange, the Justice Department said. Two people have been arrested in connection with the case.

Officials said they arrested Ilya Lichtenstein (34), a Russian-US national residing in the US, and his wife, Heather Morgan (31). The couple is scheduled to make their initial appearances in federal court later in the day. 

Bitfinex is the exchange affiliated with the world’s biggest stablecoin, Tether. In August 2016, Bitfinex reported a security breach and halted all trading, withdrawals, and deposits. The company later disclosed in a blog post some of its users had their Bitcoin stolen, and that it had reported the theft to law enforcement. 

Course of action

“Today’s arrests, and the Department’s largest financial seizure ever, show that cryptocurrency is not a safe haven for criminals,” Deputy Attorney General Lisa Monaco said in a statement. “In a futile effort to maintain digital anonymity, the defendants laundered stolen funds through a labyrinth of cryptocurrency transactions.”

Read more: Crypto market shed $350 billion on weekend, weighed down by rate hikes, inflation

The couple allegedly conspired to launder 119,754 Bitcoin stolen after a hacker breached Bitfinex’s systems in 2016. The digital currency haul was estimated to be valued at about $71 million at that time, the Justice Department said.

Also read: Bitcoin briefly drops below $40,000, lowest since September as investors shed risk

The department said the total value of stolen Bitcoin is now worth about $4.5 billion. 

If found guilty, the couple faces up to 20 years in prison on account of money laundering. In addition, they could receive an additional sentence of up to five years for conspiracy to defraud the U.S., according to the Justice Department statement. 

Bitfinex’s statement

Meanwhile, Bitfinex stated that it would use an amount equal to 80% of the recovered net funds to repurchase and burn outstanding UNUS SED LEO tokens, if it recovers the stolen bitcoin, within 18 months from the date of recovery.

“These token repurchases can be accomplished in open market transactions or by acquiring UNUS SED LEO in over-the-counter trades, including directly trading bitcoin for UNUS SED LEO,” said the company.

The UNUS SED LEO token was created to try and backstop a fiscal hole created after an unrelated payment processor used by Bitfinex was seized by authorities in three different countries.

The LEO token began pumping against the dollar on Bitfinex around 16:00 UTC, climbing from $4.97 to over $7 within an hour.

Also read: Crypto crime hits record high of $14 billion in 2021, mostly due to DeFi scams and thefts

Picture Credits: CoinDesk

With inputs from CoinDesk and US Department of Justice