Ilya Lichtenstein and Heather Morgan (also known as the “Crocodile of Wall Street”), have pled guilty to the money laundering conspiracy charges leveled against them by the United States Department of Justice (DOJ). According to the statement released by the DOJ, on August 3, the couple admitted to laundering the proceeds from a hack of about 120,000 Bitcoin (BTC) from the crypto exchange Bitfinex.
The Backstory Of The Bitfinex Hack
The authorities arrested Ilya Lichtenstein and Heather Morgan on February 2022. Upon arrest, the government discovered and seized above 95,000 of the stolen BTC (worth close to $3.6 billion at the time of the arrest) from crypto wallets that belonged to the defendants. This event marked the largest seizure in the agency’s history. Since the arrest, the Agency has discovered and recovered an additional $475 million worth of crypto stolen from the hack.
According to court documents, Lichtenstein, who orchestrated the hack in 2016, admitted to using several advanced hacking tools and techniques to access Bitfinex’s network. Once he gained access, he fraudulently authorized over 2,000 transactions which saw 119,754 BTC being transferred from Bitfinex to Lichtenstein’s crypto wallet.
After stealing the funds, Lichtenstein went back into Bitfinex’s system in a bid to cover his tracks and deleted the access credentials, log files, and other digital footprints that may have been traced to him and served as evidence for law enforcement. It was after the hack that Lintenstein enlisted the help of his wife to launder the stolen funds.
When the Bitfinex hack occurred, bitcoin was trading under $1,000 but had skyrocketed to around $44,000 when the couple was arrested in 2022, causing the value of the stolen tokens to increase to about $4.5 billion.
Total market cap chart sitting at $1.127 trillion | Source: Crypto Total Market Cap on Tradingview.com
Money Laundering Tactics
Lichtenstein and his wife Morgan used various money laundering tactics to launder the funds without raising suspicions. They created fake IDs to set up online accounts on the dark web and crypto exchanges where they deposited the stolen funds.
They then withdrew the funds, converted the bitcoins to other cryptocurrencies, and stored them in crypto mixing services. All this was to break the transaction trail and make it harder for the authorities or anyone to trace the funds back to them.
The couple then set up US-based business accounts to legitimize their banking activities. Lichtenstein also exchanged some of the stolen funds into gold coins, which Morgan helped bury.
Interestingly, the couple wasn’t away from the public eye as Morgan had a LinkedIn page describing herself as a “growth expert & serial entrepreneur.” She also has a TikTok page where she gives business tips.
Liechtenstein currently faces a maximum penalty of 20 years for conspiracy to commit money laundering. While Morgan could face up to five years after pleading to one count of money laundering conspiracy and another count of conspiracy to defraud the United States.
