WASHINGTON (AP), -- Tuesday's announcement by the Justice Department included more than $3.6B in financial seizures and arrests of a couple from New York for conspiring to launder billions in cryptocurrency stolen during the hack of a virtual currency exchange in 2016.
Federal law enforcement officials claimed that the sum recovered was connected to Bitfinex's hack, a virtual currency exchange whose system were breached nearly six years ago by hackers.
Ilya "Dutch", a Russian citizen, was arrested in Manhattan Tuesday morning. He and Heather Morgan, his 31-year-old wife, were accused of using sophisticated techniques to hide the transactions and launder the stolen cryptocurrency. Federal charges against them include conspiracy to commit money laundering, and conspiracy to defraud America.
"The message to criminals was clear: Cryptocurrency cannot be considered a safe haven. In a video released by the Justice Department, Lisa Monaco, Deputy Attorney General, stated that we can and will follow the money in any form.
A magistrate judge decided that Lichtenstein could be released to home detention with a $5 million bond signed by his parents. The bond amount for Morgan was $3 million. They would remain in custody until they met the bail conditions.
Prosecutors argued that defendants should not be allowed to bail because they are flight risk who could still have access to large sums of money. Investigators also found a folder labelled "Passport Ideas" in their home that contained information about how to obtain fake IDs and a stash with burner phones.
Anirudh Bansal, the defense attorney, countered that his clients did not intend to flee. He claimed that they knew they were being investigated since late last year. He also said that the charges were "thin" as well as overblown.
Bansal stated, "I don’t believe you’ll find that billions have been laundered."
In the Bitfinex hack, a hacker made more than 2,000 bitcoin transactions without authorization. The hacker sent stolen funds to a digital account under Lichtenstein's supervision. Prosecutors claim that the couple was responsible for the theft of approximately $71 million worth bitcoin, which is valued at more than $4.5 trillion today.
Authorities claim they eventually traced the stolen money to more than a dozen accounts controlled by Morgan, Lichtenstein and their businesses. They are accused of using classic money-laundering methods to conceal their activities and track the movement of the money. This includes setting up accounts under fictitious names and using computer software to automate transactions.
Prosecutors said they also used AlphaBay, which was a dark-web criminal marketplace, to hide their transactions and make it harder to trace them.
Prosecutors claimed that millions of dollars were spent on the transactions through bitcoin ATMs. They were used to buy gold and other non-fungible tokens, as well as mundane items such as Walmart gift cards for personal expenses.
Officials from the Justice Department claim that although cryptocurrency and virtual currency exchanges are an innovation, they have also been associated with money laundering, ransomware, and other crimes. In recognition of this trend, the Justice Department announced last year the creation of the National Cryptocurrency Enforcement Team.
Monaco stated in a statement that "Today's arrests and the Department's biggest financial seizure of all time show that cryptocurrency isn't a safe haven to criminals." The defendants used cryptocurrency transactions to launder stolen funds in a futile attempt to preserve digital anonymity. The department was able to once again demonstrate that it can and will track the money no matter what form it takes thanks to its meticulous enforcement efforts.