Bitfinex Heist Mastermind Sentenced to 5 Years in $10 Billion Theft

Ilya Lichtenstein, a hacker behind one of history’s biggest cryptocurrency thefts, received a five-year prison sentence.

In 2016, he orchestrated the theft of 119,754 Bitcoin from Bitfinex by authorizing 2,000 fraudulent transactions. He later teamed up with his wife, Heather Morgan, to launder the stolen funds.

$10 Billion in Stolen Bitcoin

The couple pleaded guilty on August 3, 2023, to conspiracy charges tied to money laundering. The court will later sentence Morgan on November 18, and Lichtenstein will serve three additional years of supervised release after his imprisonment.

The Bitfinex heist, initially valued at $71 million, became one of the largest cybercrimes ever as Bitcoin’s value skyrocketed. To crack the case, the IRS-Criminal Investigations unit, FBI, Homeland Security, and blockchain forensics firm TRM Labs worked together for seven years.

“Today he told a jury that he had access to Bitfinex’s systems for several months, and also hacked accounts at other exchanges, for example Coinbase and Kraken. Some of the stolen money went to buy non-fungible tokens, gold, Walmart gift cards, shrooms and LSD,” one X user chimed in.

Lichtenstein’s methodology, which used darknet markets, various exchanges, coin mixers, and other techniques, allowed him to cover his tracks for years successfully. It was only in 2022 that authorities were eventually able to seize a single wallet with 94,000 BTC, which prompted more investigations that revealed gold coins, physical gold, and USD.

Some have dubbed him a “mastermind hacker” for his sophisticated process. In March, producers announced a Hollywood film about Lichtenstein and Morgan is in production.

Bloomberg reports that the US government achieved its largest cryptocurrency recovery to date by seizing Lichtenstein’s stolen assets. Despite facing a potential 25-year sentence, he later received significant leniency for cooperating with authorities and testifying in other cryptocurrency cases, including Bitcoin Fog.

Bitcoin Fog and Its Role in the Heist

It was only on November 8 that Roman Sterlingov, the founder of Bitcoin Fog, was sentenced to 12 years for operating the same tool that enabled Lichtenstein to pull off the Bitfinex heist.

Bitcoin Fog, a darknet coin mixer, played a critical role in Lichtenstein’s scheme to launder funds. Coin mixers obscure transaction trails by blending multiple transfers, making them hard to trace. A great example of this is Tornado Cash.

The DoJ press release states that Sterlingov knowingly used his tool to help launder funds from various illegal activities.

“As proven at trial, Roman Sterlingov created and used an online tool to process hundreds of millions in illegal transactions, enabling darknet drug dealers and those who sell child sexual abuse material, to operate. Today’s sentence sends an unmistakable message: those who help criminals with online payments for their illegal activities will face serious penalties,” said US Attorney Graves.

Sterlingov was sentenced to prison and ordered to pay a fine of $395.6 million. He also had to give up seized cryptocurrencies and cash worth about $1.76 million. Additionally, he lost ownership of his Bitcoin Fog wallet, which holds around 1,345 Bitcoins valued at over $103 million.

Bitcoin Fog operated for ten years, processing over 1.2 million Bitcoin transactions worth about $400 million. Most funds originated from darknet markets and supported various illegal activities.

In March 2024, a jury convicted Sterlingov of money laundering, conspiracy, and operating an unlicensed money transmission business after a month-long trial.