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Bitfinex hackers who stole billions in cryptocurrency plead guilty

On August 3 and 4, 2023, a married couple from New York City pleaded guilty to money laundering conspiracies arising from the hack and theft of approximately $3.6 billion in cryptocurrency from the Bitfinex exchange in 2016.

In Short :

  • The husband, Lichtenstein, admitted to using multiple advanced hacking tools and techniques to gain entry into the cryptocurrency exchange’s network.
  • The couple was dubbed the “Bitcoin Bonnie and Clyde” by some media outlets.
  • The Justice Department seized $3.6 billion in stolen bitcoin.

What charges were Ilya Lichtenstein and his wife, Heather R. Morgan, facing

Ilya Lichtenstein and his wife, Heather R. Morgan, were charged with conspiring to launder $3.6 billion in Bitcoin stolen from one of the world’s largest virtual currency exchanges, Bitfinex, in 2016.

The couple was arrested in February 2022 and charged with attempting to launder the proceeds of almost 120,000 bitcoin stolen in the hack of Bitfinex.

They were accused of working together to launder the proceeds through complex virtual currency platforms,

after which Morgan would deposit the stolen money in bank accounts and claim it as income from shell companies.

The couple was dubbed the “Bitcoin Bonnie and Clyde” by some media outlets.

On August 3 and 4, 2023, Lichtenstein and Morgan pleaded guilty to money laundering conspiracies arising from the hack and theft of approximately $3.6 billion in cryptocurrency from the Bitfinex exchange in 2016.

What was the amount of cryptocurrency stolen in the Bitfinex hack

In August 2016, the Bitfinex cryptocurrency exchange was hacked, and 119,756 bitcoin,

worth about US$72 million at the time, were stolen.

The US government recovered and seized a portion of the stolen bitcoin, then worth US$3.6 billion, in February 2022.

What is the potential sentence for Ilya Lichtenstein and Heather Morgan if convicted

The potential sentence for Lichtenstein and Morgan has not been announced yet, as their sentencing date has not been set.

However, the maximum sentence for money laundering is 20 years in prison and a fine of up to $500,000 or twice the value of the property involved in the transaction, whichever is greater.

What was the impact of the Bitfinex hack on the cryptocurrency ecosystem

The Bitfinex hack, which took place in August 2016, had a significant impact on the cryptocurrency ecosystem.

  • The theft of nearly £60m worth of bitcoin from one of the world’s largest digital currency exchanges resulted in the value of Bitcoin plunging about 20% within hours.
  • The hack revealed the vulnerabilities of the exchanges and made it clear that the decentralized ecosystem is not beyond anyone’s reach.
  • The incident also highlighted the need for better security measures and regulations in the cryptocurrency industry.
  • Bitfinex halted all Bitcoin withdrawals and trading and said it was tracking down the hack.
  • The theft of such a large amount of cryptocurrency also raised concerns about the safety of digital assets and the need for better security measures.

The US government’s recovery and seizure of a portion of the stolen bitcoin, then worth US$3.6 billion,

in February 2022 by decrypting a file owned by Ilya Lichtenstein that contained addresses and private keys associated with the stolen funds, was a significant development in the case.

How did Bitfinex respond to the hack and what measures did they take to prevent future hacks

Bitfinex responded to the hack by halting all Bitcoin withdrawals and trading and said it was tracking down the hack.

The exchange also stated that only its bitcoin holdings were impacted,

and funds transferred to the exchange following the hack were said to be secure.

Bitfinex settled with the US Commodity Futures Trading Commission (CFTC) earlier in the year over alleged trading violations,

paying a $75,000 settlement while neither admitting nor denying the charges.

Bitfinex commissioned a security review by Canadian cryptocurrency consultancy and development firm Ledger Labs,

which found that Bitfinex made a critical error by placing two of the three keys on the same device,

giving an attacker full access to Bitfinex’s internal systems and to “security tokens”

that allowed the attacker to manipulate Bitfinex’s operating system.

Bitfinex did not provide a public report accepting responsibility and remedying the security lapses

The hack revealed the vulnerabilities of the exchanges and made it clear that the decentralized ecosystem is not beyond anyone’s reach.

Bitfinex’s response to the hack highlighted the need for better security measures and regulations in the cryptocurrency industry.

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