The cause and consequences of the Bitfinex 120,000 Bitcoin theft case were solved. The hacker's identity was revealed and it is unlikely that the market would be crashed

Wu said that in the early morning of February 9th, Beijing time, the U.S. Department of Justice disclosed that two people were arrested in Manhattan on the morning of February 8th on suspicion of conspiracy to launder cryptocurrency, which was stolen in the 2016 hacking attack on the virtual currency exchange Bitfinex and is currently worth about $4.5 billion. The arrested 34-year-old Ilya Lichtenstein and his wife, 31-year-old Heather Morgan, both live in New York City, New York. Lichtenstein and Morgan are charged with conspiracy to launder money, which is punishable by up to 20 years in prison, and conspiracy to defraud the U.S. government, which is punishable by up to 5 years in prison. But they (strangely) have not been charged with hacking. The defendants have been "aware" of the investigation since at least November last year, after one of their service providers received a subpoena, but did not flee before being arrested. The two are currently being held on bail at $5 million and $3 million.

In 2016, 119,756 Bitcoins were stolen from Bitfinex user accounts, making it the second largest Bitcoin theft after the Mr Gox theft. As a result, Bitcoin plummeted 23% that day. After the 2016 theft, the exchange offered BFX Tokens to all affected users. Each token represented a $1 loss. These BFX started trading on Bitfinex at less than $0.20 and gradually appreciated to nearly $1. Monthly redemptions began on September 1, 2016, and the last BFX was redeemed in early April 2017. More than 52 million BFX were converted into iFinex Inc. shares at a 1:1 ratio to shares. It was rumored in the market that Zhao Dong, the founder of Renrenbit, became a minority shareholder of Bitfinex at that time.

Lichtenstein and Morgan conspired to launder the proceeds of 119,754 bitcoins stolen from the Bitfinex platform after hackers breached Bitfinex’s systems and initiated more than 2,000 unauthorized transactions. These unauthorized transactions sent the stolen bitcoins to digital wallets under Lichtenstein’s control. Over the past five years, approximately 25,000 of the stolen bitcoins were transferred from Lichtenstein’s wallets through a complex money laundering process, with some of the stolen funds deposited into financial accounts controlled by Lichtenstein and Morgan. The remainder of the stolen funds, including more than 94,000 bitcoins, remain in wallets used to receive and store the hackers’ illicit proceeds. After executing a court-authorized search warrant on online accounts controlled by Lichtenstein and Morgan, agents gained access to files in online accounts controlled by Lichtenstein. These files contain the private keys needed to access digital wallets that directly receive funds stolen from Bitfinex, and allow agents to legally seize and recover more than 94,000 bitcoins stolen from Bitfinex. At the time of the seizure, the recovered bitcoins were worth more than $3.6 billion. (On February 1, according to Whale Alert, 64,633 BTC of stolen money from the 2016 Bitfinex theft was transferred to an unknown wallet, suspected to be the U.S. Department of Justice continuing to move funds out)

The criminal complaint alleges that Lichtenstein and Morgan used a number of sophisticated money laundering techniques, including using fictitious identities to establish online accounts; utilizing computer programs to automate transactions, a money laundering technique that allows many transactions to be conducted in a short period of time; depositing stolen funds into accounts on various virtual currency exchanges and darknet marketplaces and then withdrawing the funds, obfuscating the trail of transaction history by disrupting the flow of funds; converting Bitcoin into other forms of virtual currency, including anonymity-enhanced virtual currencies (AECs); and using U.S. business accounts to legitimize their banking activities.

CoinDesk's investigation and court debate records revealed more personal information about the two: Lichtenstein was born in Russia, came to the United States at the age of 6, holds a Russian passport, and is an alumnus of the famous Silicon Valley accelerator program Y Combinator; with the initial funding, he co-founded a data and advertising technology startup called MixRank, which received funding from Mark Cuban and others. Occasionally, Lichtenstein would warn people about the threat of hackers on Twitter.

His wife, Morgan, is a young marketing entrepreneur and rapper with many bylines in business magazines, graduated from UC Davis, earned an M.A. in International Economic Development from the American University in Cairo, and studied Turkish Monetary Policy at Bilkent University in Ankara. At 23, she started a company called SalesFolk, which used a stable of copywriters to send emails to companies that wanted to market their wares on the Internet.

Bitfinex stated that we are pleased that the U.S. Department of Justice announced today that it has recovered most of the Bitcoin stolen during the August 2016 security breach. We have been working extensively with the DOJ since it began its investigation and will continue to do so. Bitfinex will cooperate with the DOJ and follow appropriate legal procedures to establish our right to return the stolen Bitcoin. If Bitfinex receives the stolen Bitcoin, as stated in the LEO white paper, Bitfinex will use an amount equal to 80% of the net funds recovered to repurchase and destroy LEO within 18 months from the date of receipt. (Previously, Bitfinex issued the platform token LEO to make up for the gap in stolen funds. The price of LEO once soared due to the news on February 9) Industry insiders pointed out that Bitfinex is an old-school traditional supporter of Bitcoin in the market, and the market crash effect that some market participants are worried about after receiving Bitcoin is almost impossible to happen. Bitfinex is also working with El Salvador to issue Bitcoin bonds.

In 2020, Bitfinex said that those who established a connection between Bitfinex and the hacker would receive 5% of the total recovered property, and the hacker (if the assets were returned) would receive 25% of the market value of the total recovered property. The community joked that it would have been better if the hacker had accepted this compromise clause earlier; some people also said whether 30% of the Bitcoin should be returned to the US Department of Justice.