Jump to content

2016 Bitfinex hack: Difference between revisions

From Wikipedia, the free encyclopedia
Browse history interactively
← Previous editNext edit →
Content deleted Content added
VisualWikitext
m →Hack: wlink
→Laundering: WP:NPOV
Line 12: Line 12:
Small amounts of money began to move out of the single wallet in early 2017 through the marketplace [[AlphaBay]] to [[Money laundering|launder]] it. After AlphaBay was shuttered by international law enforcement led by the [[FBI]], the money was rerouted to the Russian marketplace [[Hydra Market|Hydra]]. The shutdown of AlphaBay may have given law enforcement access to the service's internal transaction logs to connect pieces together.<ref name=":0" />
Small amounts of money began to move out of the single wallet in early 2017 through the marketplace [[AlphaBay]] to [[Money laundering|launder]] it. After AlphaBay was shuttered by international law enforcement led by the [[FBI]], the money was rerouted to the Russian marketplace [[Hydra Market|Hydra]]. The shutdown of AlphaBay may have given law enforcement access to the service's internal transaction logs to connect pieces together.<ref name=":0" />


In February 2022, a New York couple, Ilya Lichtenstein (age 34) and his wife Heather R. Morgan (age 31),<ref name=":0" /> were charged by US federal authorities with conspiring to launder the bitcoin, which was then worth {{US$|3.6}} billion.<ref name="wapo20220208">{{cite news |last1=Barrett|first1=Devlin |title=Feds arrest couple, seize $3.6 billion in hacked bitcoin funds |url=https://www.washingtonpost.com/national-security/2022/02/08/bitfinex-hack-bitcoin-arrests/ |newspaper=[[The Washington Post]] |date=February 8, 2022}}</ref><ref name="AutoB0-4">{{Cite news|last=Lyngaas|first=Sean|date=February 8, 2022|title=Feds arrest a New York couple and seize $3.6 billion in stolen cryptocurrency|page=1|work=CNN News|url=https://edition.cnn.com/2022/02/08/investing/cryptocurrency-laundering/index.html|access-date=February 9, 2022}}</ref> Each of the pair faces a maximum sentence of 20 years in prison for conspiracy to launder money, and a maximum sentence of five years for [[Conspiracy against the United States|conspiracy to defraud the United States]].<ref name="AutoB0-4" /><ref>{{Cite web |date=2022-02-08 |title=Two Arrested for Alleged Conspiracy to Launder $4.5 Billion in Stolen Cryptocurrency |url=https://www.justice.gov/opa/pr/two-arrested-alleged-conspiracy-launder-45-billion-stolen-cryptocurrency |access-date=2022-10-31 |website=www.justice.gov |language=en}}</ref> Neither was charged with actually committing the hack.<ref>{{Cite web|date=2022-02-09|title=US Justice's largest ever financial seizure sees two arrests over $3.6bn stolen crypto|url=https://www.internationalinvestment.net/news/4044672/us-justice-largest-financial-seizure-arrests-usd-6bn-stolen-crypto|access-date=2022-02-17|website=InternationalInvestment|language=en}}</ref> Law enforcement were able to acquire a [[search warrant]] for a [[cloud storage service]] used by Lichtenstein, obtaining a spreadsheet of wallet addresses linked to the hack, and their passwords. One of the wallets had around 94,000 Bitcoin. Due to the openness and transparency of the [[blockchain]], law enforcement was able to track the money; and obtaining the passwords allowed them to seize it.<ref name=":0" /><ref>{{Cite news|url=https://www.reuters.com/world/us/us-couple-accused-laundering-crypto-bitfinex-hack-reach-plea-deal-2023-07-21/|title=Crypto rapper 'Razzlekhan,' husband reach plea deal over Bitfinex hack laundering|first1=Luc|last1=Cohen|newspaper=Reuters |date=July 21, 2023|via=www.reuters.com|access-date=July 26, 2023}}</ref><ref>{{cite web|title=In Bitfinex Cryptocurrency Heist, 2 Charged Reach Plea Deal|website=The New York Times|date=2023-07-21|url=https://www.nytimes.com/2023/07/21/nyregion/bitfinex-heist-laundering-plea-deal.html|access-date=2023-07-26}}</ref> They were charged in the case with a document known as an information, which is a type of charging document that federal prosecutors typically use when defendants have agreed to plead guilty.<ref>{{Cite web|url=https://www.cnbc.com/2023/07/21/crypto-couple-appear-set-to-plead-guilty-in-bitcoin-money-laundering.html|title='Crypto Couple' appear set to plead guilty in bitcoin hack money laundering case|first=Dan Mangan, Jim|last=Forkin|date=July 21, 2023|website=CNBC|access-date=July 26, 2023}}</ref>
In February 2022, a New York couple, Ilya Lichtenstein (age 34) and his wife Heather R. Morgan (age 31),<ref name=":0" /> were charged by US federal authorities with conspiring to launder the bitcoin, which was then worth {{US$|3.6}} billion.<ref name="wapo20220208">{{cite news |last1=Barrett|first1=Devlin |title=Feds arrest couple, seize $3.6 billion in hacked bitcoin funds |url=https://www.washingtonpost.com/national-security/2022/02/08/bitfinex-hack-bitcoin-arrests/ |newspaper=[[The Washington Post]] |date=February 8, 2022}}</ref><ref name="AutoB0-4">{{Cite news|last=Lyngaas|first=Sean|date=February 8, 2022|title=Feds arrest a New York couple and seize $3.6 billion in stolen cryptocurrency|page=1|work=CNN News|url=https://edition.cnn.com/2022/02/08/investing/cryptocurrency-laundering/index.html|access-date=February 9, 2022}}</ref> Each of the pair faces a maximum sentence of 20 years in prison for conspiracy to launder money, and a maximum sentence of five years for [[Conspiracy against the United States|conspiracy to defraud the United States]].<ref name="AutoB0-4" /><ref>{{Cite web |date=2022-02-08 |title=Two Arrested for Alleged Conspiracy to Launder $4.5 Billion in Stolen Cryptocurrency |url=https://www.justice.gov/opa/pr/two-arrested-alleged-conspiracy-launder-45-billion-stolen-cryptocurrency |access-date=2022-10-31 |website=www.justice.gov |language=en}}</ref> Neither was charged with actually committing the hack.<ref>{{Cite web|date=2022-02-09|title=US Justice's largest ever financial seizure sees two arrests over $3.6bn stolen crypto|url=https://www.internationalinvestment.net/news/4044672/us-justice-largest-financial-seizure-arrests-usd-6bn-stolen-crypto|access-date=2022-02-17|website=InternationalInvestment|language=en}}</ref> Law enforcement were able to acquire a [[search warrant]] for a [[cloud storage service]] used by Lichtenstein, obtaining a spreadsheet of wallet addresses linked to the hack, and their passwords. One of the wallets had around 94,000 Bitcoin. As the transactions were logged on the [[blockchain]], law enforcement was able to track the money; and obtaining the passwords allowed them to seize it.<ref name=":0" /><ref>{{Cite news|url=https://www.reuters.com/world/us/us-couple-accused-laundering-crypto-bitfinex-hack-reach-plea-deal-2023-07-21/|title=Crypto rapper 'Razzlekhan,' husband reach plea deal over Bitfinex hack laundering|first1=Luc|last1=Cohen|newspaper=Reuters |date=July 21, 2023|via=www.reuters.com|access-date=July 26, 2023}}</ref><ref>{{cite web|title=In Bitfinex Cryptocurrency Heist, 2 Charged Reach Plea Deal|website=The New York Times|date=2023-07-21|url=https://www.nytimes.com/2023/07/21/nyregion/bitfinex-heist-laundering-plea-deal.html|access-date=2023-07-26}}</ref> They were charged in the case with a document known as an information, which is a type of charging document that federal prosecutors typically use when defendants have agreed to plead guilty.<ref>{{Cite web|url=https://www.cnbc.com/2023/07/21/crypto-couple-appear-set-to-plead-guilty-in-bitcoin-money-laundering.html|title='Crypto Couple' appear set to plead guilty in bitcoin hack money laundering case|first=Dan Mangan, Jim|last=Forkin|date=July 21, 2023|website=CNBC|access-date=July 26, 2023}}</ref>


Some of the funds were moved towards more traditional financial accounts and used on gold, [[Non-fungible token|NFTs]], and a [[Walmart]] gift card spent on [[Uber]] rides and a [[PlayStation]].<ref>{{Cite magazine |date=2022-08-16 |title=The Ballad of Razzlekhan and Dutch, Bitcoin's Bonnie and Clyde |url=https://www.vanityfair.com/news/2022/08/the-ballad-of-razzlekhan-and-dutch-bitcoins-bonnie-and-clyde |access-date=2022-08-18 |magazine=Vanity Fair |language=en-US}}</ref> Though hundreds of millions of dollars were converted to fiat currency, 80% of the Bitcoin were still in the original wallet at the center of the hack.<ref name=":0" />
Some of the funds were moved towards more traditional financial accounts and used on gold, [[Non-fungible token|NFTs]], and a [[Walmart]] gift card spent on [[Uber]] rides and a [[PlayStation]].<ref>{{Cite magazine |date=2022-08-16 |title=The Ballad of Razzlekhan and Dutch, Bitcoin's Bonnie and Clyde |url=https://www.vanityfair.com/news/2022/08/the-ballad-of-razzlekhan-and-dutch-bitcoins-bonnie-and-clyde |access-date=2022-08-18 |magazine=Vanity Fair |language=en-US}}</ref> Though hundreds of millions of dollars were converted to fiat currency, 80% of the Bitcoin were still in the original wallet at the center of the hack.<ref name=":0" />

Revision as of 15:59, 9 May 2024

The Bitfinex cryptocurrency exchange was hacked in August 2016.[1] 119,756 bitcoin, worth about US$72 million at the time, were stolen.[1]

In February 2022, the US government recovered and seized a portion of the stolen bitcoin, then worth US$3.6 billion,[2] by decrypting a file owned by Ilya Lichtenstein that contained addresses and private keys associated with the stolen funds.[3] Lichtenstein and his wife, Heather R. Morgan, were charged with conspiracy to launder the stolen bitcoin.[3] In August 2023, Lichtenstein admitted to committing the theft. Both Lichtenstein and Morgan pleaded guilty to money laundering.[4]

Hack

In August 2016, the Bitfinex cryptocurrency exchange, based in Hong Kong, announced it had suffered a security breach.[5] Around 2,000 approved transactions were sent to a single wallet from users' segregated wallets.[6][7] Immediately thereafter, Bitcoin's trading price plunged by 20%, causing the value of the stolen Bitcoin to dip to US$58 million.[1] After learning of the breach, Bitfinex halted all Bitcoin withdrawals and trading[8] and said it was tracking down the perpetrators of the hack.[7] Exchange customers, even those whose accounts had not been broken into, had their account balance reduced by 36% and received BFX tokens in proportion to their losses.[9] The exchange's access to U.S. dollar payments and withdrawals was then curtailed. The hack happened even though Bitfinex was securing the funds with BitGo, which uses multiple-signature security.[10]

In July 2023, Bitfinex worked with the Department of Homeland Security to recover about $315,000 in cash and cryptocurrencies stolen in the 2016 breach. The funds will be redistributed to holders of Bitfinex's Recovery Right Tokens, digital coins issued to people who suffered financial losses due to the hack.[11]

Laundering

Small amounts of money began to move out of the single wallet in early 2017 through the marketplace AlphaBay to launder it. After AlphaBay was shuttered by international law enforcement led by the FBI, the money was rerouted to the Russian marketplace Hydra. The shutdown of AlphaBay may have given law enforcement access to the service's internal transaction logs to connect pieces together.[6]

In February 2022, a New York couple, Ilya Lichtenstein (age 34) and his wife Heather R. Morgan (age 31),[6] were charged by US federal authorities with conspiring to launder the bitcoin, which was then worth US$3.6 billion.[2][12] Each of the pair faces a maximum sentence of 20 years in prison for conspiracy to launder money, and a maximum sentence of five years for conspiracy to defraud the United States.[12][13] Neither was charged with actually committing the hack.[14] Law enforcement were able to acquire a search warrant for a cloud storage service used by Lichtenstein, obtaining a spreadsheet of wallet addresses linked to the hack, and their passwords. One of the wallets had around 94,000 Bitcoin. As the transactions were logged on the blockchain, law enforcement was able to track the money; and obtaining the passwords allowed them to seize it.[6][15][16] They were charged in the case with a document known as an information, which is a type of charging document that federal prosecutors typically use when defendants have agreed to plead guilty.[17]

Some of the funds were moved towards more traditional financial accounts and used on gold, NFTs, and a Walmart gift card spent on Uber rides and a PlayStation.[18] Though hundreds of millions of dollars were converted to fiat currency, 80% of the Bitcoin were still in the original wallet at the center of the hack.[6]

Shortly after the couple's arrest, Netflix ordered a documentary series that will cover the story of Lichtenstein's and Morgan's crimes.[needs update][19]

In August 2023 both pleaded guilty. Lichtenstein additionally admitted carrying out the theft.[4]

See also

References

  1. ^ a b c Tsang, Amie (August 3, 2016). "Bitcoin Plunges After Hacking of Exchange in Hong Kong". The New York Times. Hong Kong. Archived from the original on May 18, 2017.
  2. ^ a b Barrett, Devlin (February 8, 2022). "Feds arrest couple, seize $3.6 billion in hacked bitcoin funds". The Washington Post.
  3. ^ a b "Case: 1 :22-mj-00022 - Complaint with Arrest Warrant" (Press release). February 7, 2022.
  4. ^ a b Paúl, María Luisa (4 August 2023). "'Bitcoin Bonnie and Clyde' plead guilty in 'spy novel'-like laundering case". Washington Post. Retrieved 5 August 2023.
  5. ^ "Bitfinex comes back from $69 million bitcoin heist". May 21, 2017. Archived from the original on May 22, 2017.
  6. ^ a b c d e Chow, Andrew R (February 10, 2022). "Inside the Chess Match That Led the Feds to $3.6 Billion in Stolen Bitcoin". Time. Archived from the original on 2022-02-10. Retrieved February 12, 2022.
  7. ^ a b "Bitcoin Worth $72M Was Stolen in Bitfinex Exchange Hack in Hong Kong". Fortune. Archived from the original on November 20, 2016. Retrieved October 26, 2016.
  8. ^ Shekhtman, Lonnie (August 3, 2016). "Bitcoin security breaches raise questions about digital currency's future". Christian Science Monitor. Archived from the original on May 28, 2017.
  9. ^ Baldwin, Clare (August 6, 2016). "Bitfinex exchange customers to get 36 percent haircut, debt token". Reuters. Archived from the original on March 16, 2019. Retrieved June 20, 2018.
  10. ^ "Bitcoin worth $72 million stolen from Bitfinex exchange in Hong Kong". Reuters. 2016-08-03. Retrieved 2021-10-14.
  11. ^ "Crypto Exchange Bitfinex Says $315,000 From 2016 Hack Recovered". Bloomberg. July 6, 2023 – via www.bloomberg.com.
  12. ^ a b Lyngaas, Sean (February 8, 2022). "Feds arrest a New York couple and seize $3.6 billion in stolen cryptocurrency". CNN News. p. 1. Retrieved February 9, 2022.
  13. ^ "Two Arrested for Alleged Conspiracy to Launder $4.5 Billion in Stolen Cryptocurrency". www.justice.gov. 2022-02-08. Retrieved 2022-10-31.
  14. ^ "US Justice's largest ever financial seizure sees two arrests over $3.6bn stolen crypto". InternationalInvestment. 2022-02-09. Retrieved 2022-02-17.
  15. ^ Cohen, Luc (July 21, 2023). "Crypto rapper 'Razzlekhan,' husband reach plea deal over Bitfinex hack laundering". Reuters. Retrieved July 26, 2023 – via www.reuters.com.
  16. ^ "In Bitfinex Cryptocurrency Heist, 2 Charged Reach Plea Deal". The New York Times. 2023-07-21. Retrieved 2023-07-26.
  17. ^ Forkin, Dan Mangan, Jim (July 21, 2023). "'Crypto Couple' appear set to plead guilty in bitcoin hack money laundering case". CNBC. Retrieved July 26, 2023.{{cite web}}: CS1 maint: multiple names: authors list (link)
  18. ^ "The Ballad of Razzlekhan and Dutch, Bitcoin's Bonnie and Clyde". Vanity Fair. 2022-08-16. Retrieved 2022-08-18.
  19. ^ Roth, Emma (February 12, 2022). "Netflix orders docuseries on crypto laundering couple". The Verge. Retrieved February 13, 2022.
Retrieved from "https://en.wikipedia.org/w/index.php?title=2016_Bitfinex_hack&oldid=1223053128"