The cool side of the blazing crypto ecosystem.
A Crypto newsletter covering the latest Hacks & Crime to keep you safe.

What’s in today’s crime cooler:

• Summary of What Happened

• What is the Impact on Users, Businesses, and Funds

• How to be More Secure in the Future

• Final Thoughts

A New York couple, Ilya Lichtenstein and Heather Morgan, are preparing to plead guilty to charges of conspiring to launder billions of dollars with of Bitcoin.

They allegedly stole crypto during the 2016 hack of Bitfinex, valued at nearly $4.5 billion. 119,754 bitcoin were stolen from Bitfinex’s platform after a hacker breached their systems and initiated more than 2,000 transactions. Those transactions of stolen bitcoin were sent to a digital wallet under Lichtenstein’s control. 25,000 bitcoin were transferred out to financial accounts for Ilya and Morgan.

They were not apart of the actual hacking that took place but were charged after investigators traced the stolen funds to all the accounts they owned.

$3.6 billion in Bitcoin was compromised and recovered via the digital wallet.

The couple is charged with conspiracy to commit money laundering, which has a max sentence of 20 years in prison. Also, the conspiracy to defraud the United States, which has a max sentence of five years in prison.

US judge has scheduled plea hearings on August 3, 2023. Morgan has been on house arrest and Ilya has been detained since being charged.

Users:

The hack of Bitfinex in 2016, from which the Bitcoins were stolen, would have had a significant impact on its users. Those who had their Bitcoins stolen would have experienced financial loss, and the trust in the security of the platform would have been damaged. This could lead to users being more cautious in their use of cryptocurrency exchanges or even avoiding them altogether. Furthermore, the laundering of stolen Bitcoins could contribute to the perception of cryptocurrencies being associated with illegal activities, which could deter potential users.

Businesses:

The Bitfinex hack would have had a significant impact on the business itself, damaging its reputation and potentially leading to a loss of customers. Other businesses in the cryptocurrency industry might also be affected as such incidents can lead to increased regulatory scrutiny and the need for enhanced security measures, which could increase operational costs. Businesses that were indirectly involved in the laundering process, such as those where the couple had their accounts, might also face reputational damage and potential legal consequences.

Funds:

The laundering of $4.5 billion in stolen Bitcoins represents a significant financial crime. The seizure of over $3.6 billion in Bitcoin by law enforcement is a substantial recovery. However, the initial theft and subsequent laundering can contribute to instability in the cryptocurrency market. It can also lead to calls for more stringent regulations on cryptocurrencies, which could impact their value and the overall market. The incident also highlights the potential for cryptocurrencies to be used in illegal activities, which could influence how they are viewed as a form of money.

It’s tough to say what could have been prevented in this situations for users, business and funds. Back in 2016, the Internet and Bitcoin was a LOT different.

The Organized Crime and Corruption Reporting Project (OCCRP) obtained a report from Ledger Labs that investigated the security breach at Bitfinex, a cryptocurrency exchange. The report found that Bitfinex had stored two of the three required security keys on a single device, a critical error that allowed a hacker to gain full access to Bitfinex's internal systems. These keys gave access to "security tokens," which enabled the attacker to manipulate Bitfinex's operating system. With control over two security tokens, the hacker was able to increase the daily limit on the number of transactions and quickly drain a significant amount of Bitcoin. Bitfinex did not dispute the authenticity of the report, while Bitgo declined to comment, and Ledger Labs did not respond to a request for comment.

The couple has been all over social media back before they got arrested and were pretty dumb about being silent or anonymous. So many people knew what they did and they continued to not care and show boat on social media. Hopefully the recovered funds can get back in the hands of the users of Bitfinex. This potentially is the biggest Bitcoin hack ever, since its been over 7 years and Bitcoin was around $600.

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Disclaimer: The information shared in this newsletter is for informational purposes only and should not be considered financial advice. It is crucial to conduct independent research and consult with a financial advisor before making any investment decisions.