A few days ago, all the paperwork related to the Bitfinex exchange crypto hack case was filed.
The exchange platform was hacked in 2010 for the hefty sum of 120,000 BTC, which was recovered a few years later by US investigative authorities.
Now a New York couple faces 20 years in prison.
Let’s retrace the steps of this intriguing story together until we get to the latest updates.
The story of the Bitfinex crypto hack
In August 2016, the crypto exchange Bitfinex suffered a major hack that led to the loss of as many as 120,000 BTC, corresponding to about $70 million at the time, which then became $4 billion upon their discovery a few years later.
The Bitfinex security breach caused 2,000 outbound transactions to be approved by the exchange, which has lost about ⅕ of its global BTC trading volume since that incident.
US investigative authorities immediately moved to try to figure out where that money had gone, with pressure mounting as the price of cryptocurrency rose in the markets.
The problem is that in 2016, the “Bitcoin” topic still represented a taboo, and the sophisticated on-chain tracking techniques present today did not exist.
In any case, since the blockchain is public and easily verifiable by anyone, all movements related to the Bitfinex crypto hack have been carefully analyzed in the intervening years by various specialized and non-specialized entities.
The first movements identified date back to January 2017, where some of the theft was sent to the now-defunct darknet marketplace “Alphabay,” often used for illicit transactions such as drug and arms exchanges.
From Alphabay, Bitcoin were mixed together with other funds, making it complex for law enforcement to detect them in later years.
Later, more Bitcoin from the crypto hack were transferred to the Russian Hydra platform and later to the “Wasabi” wallet, which is used to take advantage of a particular transaction, known as “Coinjoin,” that serves to increase the privacy of those who use it.
In 2020 and 2021, more money from the cyber heist was sent to 4 centralized exchanges, which served to convert the loot into fiat, as well as to be spent on Walmart vouchers, physical gold, NFTs, and other tangible assets.
These latter transactions were instrumental in allowing the FBI, IRS-CI, and HSI to trace the identity of a US couple and arrest them in February 2022 on charges of laundering more than $3 billion in cryptocurrency.
The two were never accused of carrying out the crypto hack but only of using the money by passing it through the most diverse avenues of the blockchain.
The US couple held responsible for laundering money from Bitfinex crypto hack
In February 2022, Heater Morgan and Ilya Lichtenstein, a US couple living in New York, were held responsible for laundering billions of dollars from the Bitfinex crypto hack.
The story immediately caused a stir as Morgan, aka “Razzlekhan,” was a rapper with a very questionable tracklist in her portfolio, calling herself “the crocodile of Wall Strett.”
The grotesque songs posted by RazzleKhan and in general the rather ridiculous figure of the pair were used both to mock the incident and to make those in charge understand that the two could not have engineered the hack of Bitfinex’s security systems on their own, but were merely pawns in a much larger scheme
In any case, on 5 January 2022, the FBI raided the home of Heater Morgan, whose name was discovered through a combined effort of investigative authorities and studies by on-chain analysis companies.
The closure of the Alphabay marketplace was crucial to being able to trace the rapper’s identity, which was later confirmed by an account created in her name to purchase Walmart vouchers with the stolen Bitcoin.
In this regard, the co-founder of Elliptic, a financial services company on blockchain described the incident by stating:
“The fact that law enforcement blocked AlphaBay probably led to the downfall of Lichtenstein and Morgan.”
Inside the couple’s home, US authorities found several cryptographic addresses with associated login passwords (saved in Lichtenstein’s cloud storage account), all of which were linked to the Bitfinex crypto hack.
On that occasion, 94,643 BTC were found, equivalent to more than $3.6 billion at the time of the seizure.
This is the largest financial seizure in US history conducted by the Department of Justice.
In July 2022, a judge granted bail to Morgan but not Lichtenstein, with the defense arguing they had stronger evidence against him than against her.
Couple accepts plea deal: face 20 years in prison
In recent days the story of the Bitfinex crypto hack has been back in the news after the couple’s husband agreed to a plea deal to the prosecutor, hinting that he will plead guilty at the next court hearing set for 3 August 2023.
Morgan and Liechtenstein, who have been living the life of kings for several years, will now have to give back the entire amount they stole, which has since been partly dissipated by the crazy spending and partly converted into other cryptocurrencies.
Among the currencies that have to be returned are 117,376 Bitcoin Cash, the same amount of Bitcoinsv, 118,102 Bitcoin gold, 29,016 Monero, and 7,389,269 Tether, as well as several thousand ETH and WETH present in DeFi.
The indictment against them speaks of cyber conspiracy and money laundering of 25,000 BTC as well as accessing the remaining 94,000 BTC.
The story of the Bitfinex crypto hack still remains partially unresolved, with authorities yet to discover the real perpetrators of the theft.
The couple’s plea deal represents one of the most dramatic criminal cases in cryptocurrency history, lightened by the comedic touch provided by the girl’s rap songs.
Previously Morgan and Lichtenstein tried to fight the charges, claiming there were “many deficiencies in the government’s evidence and unsupported conclusory leaps.”
The turning point in the case came when in March 2022, prosecutors said they were in talks with Morgan’s lawyers to settle the matter in a plea deal, including including Liechtenstein in the trial.
Now the two face a maximum sentence of 25 years in prison, and will soon have to appear before Judge Colleen Kollar-Kotelly in Washington.