The U.S. Department of Justice (DOJ) announced in a February 2022 statement[1] that it had successfully seized the majority of the bitcoin drained in a 2016 hack of the cryptocurrency exchange Bitifinex after gaining control of the wallet supposedly containing the stolen funds.
Despite the apparent unlikelihood of retaking long-gone funds, a complex but deterministic trail of evidence allowed law enforcement to catch Ilya Lichtenstein and Heather Morgan, a couple that was allegedly trying to obfuscate the illegal origins of the bitcoin they had been leveraging to flex shiny lifestyles[2] through a complex money laundering scheme.
But what seemed to be a carefully-thought-out scam actually turned out to be a quite fragile one filled with missteps, which facilitated the work of special agent Christopher Janczewski, assigned to the Internal Revenue Service’s criminal investigation unit (IRS-CI). This work ultimately led to Janczewski filing a complaint[3] with judge Robin Meriweather to charge Lichtenstein and Morgan for money laundering conspiracy and conspiracy to defraud the United States.
This article takes a deep dive into the nuances of the law enforcement work that uncovered the identities of the accused Bitfinex hackers, and into the steps of the charged couple, relying on the accounts provided by the DOJ and special agent Janczewski. However, since crucial aspects of the investigation have not been disclosed by official documents, the author will provide plausible scenarios and possible explanations to questions that remain unanswered.
How Did Law Enforcement Seize The Stolen Bitfinex Bitcoin?
Bitcoin proponents often boast about the monetary system’s set of principles[4] that enables a high degree of sovereignty and resistance to censorship, making Bitcoin transactions impossible to be stopped and bitcoin holdings impossible to be seized. But, if that is true, how then was
