Ilya Lichtenstein, sentenced to 5 years in prison for having participated in Bitfinex Hack

Ilya Lichtenstein, a 35-year-old programmer, was sentenced to five years in prison for his part in laundering stolen Bitcoin from crypto exchange Bitfinex.

The US Department of Justice (DOJ) announced the ruling, marking a major development in a case involving the theft of nearly 120,000 BTC, valued at $71.8 million in 2016, but worth more than 4,500 million dollars at the time of his arrest in 2022.

The Bitfinex Hack

According to court documents, the 35-year-old was responsible for infiltrating the Bitfinex network using sophisticated hacking tools. Once inside, he transferred 119,754 BTC from the exchange to a crypto wallet under his control by executing over 2,000 unauthorized transactions.

After the hack, Lichtenstein tried to cover his tracks by deleting access credentials and log files from the Bitfinex network, which could have provided evidence to investigators. He later asked his wife, Heather Morgan, to help him wash the stolen loot.

The DOJ revealed that Lichtenstein and Morgan used various techniques to disguise the origins of the stolen cryptocurrency. These included using fake identities to set up online accounts, deploying software to automate transactions, as well as converting Bitcoin into other cryptocurrencies, a tactic known as “chain hopping.”

In addition, the pair deposited portions of the stolen funds on dark web markets and multiple crypto exchanges and later withdrew them to various accounts to evade tracking.

They also used cryptocurrency mixing services like Bitcoin Fog to anonymize transactions and opened US-based business accounts to make their banking activity appear legitimate. In addition, Lichtenstein and Morgan converted some of the money into gold coins.

The judgment of Lichtenstein

The 2016 Bitfinex hack remains one of the largest known cybercrimes in the digital asset space. Although initially only suspected of money laundering, Lichtenstein later confessed to being the hacker behind the breach.

However, despite his admission, neither he nor Morgan were directly accused of running the exploit. Instead, both pleaded guilty on August 3, 2023 to a single count of conspiracy to commit money laundering, a charge that carries a maximum penalty of up to 20 years in prison.

After his arrest in February 2022, law enforcement located and recovered approximately $3.6 billion of the stolen Bitcoin. A portion of these funds were returned to the exchange.

In addition to his five-year prison sentence, Lichtenstein will serve three years of supervised release following his conviction. Morgan, meanwhile, is scheduled to be sentenced on November 18.

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