Bitcoin—a decentralized digital currency created in 2009—is the world’s most popular and highly valued form of cryptocurrency. Though many argue that bitcoin is good for the global economy because it supports many financial transactions, but with an unregulated global economy comes legal concerns, particularly concerns over criminals seeking to evade taxes and launder money using bitcoin. Transactions that occur through the exchange of altcoins such as bitcoin are independent from formal banking systems in which account holders must provide a proven identity, meaning tax evasion and other fraudulent activities are more difficult to track.
2016 Bitfinex Hack
The Justice Department recently announced it had seized more than $3.6 billion in bitcoin allegedly stolen as part of a hack of Bitfinex—the world’s largest dollar-based exchange for bitcoin—that occurred in 2016. They also announced that authorities have arrested a husband and wife in New York—Ilya Lichtenstein, 34, and Heather Morgan, 31—for allegedly trying to launder the cryptocurrency fortune.
At the time of the theft, the amount of stolen bitcoin was first valued at about $71 million and regarded as the second-biggest security breach ever of such an exchange, but since the cryptocurrency has appreciated significantly since the theft, the total value is now around $4.5 billion, according to The Washington Post. The case now marks the largest single seizure of funds in the history of the Justice Department.
Lichtenstein’s involvement in the laundering scheme
Ilya Lichtenstein, 34, and his wife, Heather Morgan, 31, were charged with conspiring to launder money after being accused of trying to launder 119,754 bitcoin that were stolen after a hacker breached Bitfinex and initiated over 2,000 unauthorized transactions, and prosecutors say that the bitcoin was sent to a digital wallet controlled by Lichtenstein.
Lichtenstein is a tech entrepreneur who goes by the nickname “Dutch” and holds both U.S. and Russian citizenship, and according to court papers, he describes himself online as an “angel investor.” His wife, Morgan, is a part-time rapper who also ran an email marketing company called Salesfolk.
“Cryptocurrency is not a safe haven for criminals”
In a written statement, Deputy Attorney General Lisa O. Monaco attests that despite crypto’s existence in an unregulated global economy, “Cryptocurrency is not a safe haven for criminals.” She continues, “Thanks to the meticulous work of law enforcement, the department once again showed how it can and will follow the money, no matter the form it takes.”
Prosecutors say that they were able to trace bitcoin from the Bitcoin hack through an account at Alphabay—a platform for illicit drugs, firearms, and fake documents that was shut down by authorities in 2017—and beyond.
Court documents do not accuse Lichtenstein and Morgan of the hack itself, and U.S. officials said that a judge would make the ultimate decision regarding how the recovered money would be distributed and that the government would seek to return funds to their original and rightful owners.
Crypto’s appeal to criminals
Law enforcement officials have voiced concern over the fast moving and changing world of cryptocurrencies, as it has attracted criminals who are eager to steal and hide money from authorities. A National Cryptocurrency Enforcement Team was lauded by The Justice Department last year to expand investigations into money laundering and other financial crimes such as these.
At Dhar Law, LLP, we have intensive experience defending the most complex cases of fraud and white collar crime. No matter the seriousness of the charge, we put all our resources into fighting for anyone accused of a serious crime. If you have been accused of money laundering or fraud or you are under investigation by local, state or Federal authorities such as the U.S. Attorney’s Office or National Cryptocurrency Enforcement Team, then please contact us at (617) 880-6155 so we can get to work on your case and your defense today.