2016 Bitfinex hack

The Bitfinex cryptocurrency exchange was hacked in August 2016. 119,756 bitcoin, worth about US$72 million at the time, was stolen.

In February 2022, the US government recovered and seized a portion of the stolen bitcoin, then worth US$3.6 billion, by decrypting a file owned by Ilya Lichtenstein that contained addresses and private keys associated with the stolen funds. Lichtenstein and his wife, Heather R. Morgan, were charged with conspiracy to launder the stolen bitcoin. In August 2023, Lichtenstein admitted to committing the theft. Both Lichtenstein and Morgan pleaded guilty to money laundering.

Hack
In August 2016, the Bitfinex cryptocurrency exchange, based in Hong Kong, announced it had suffered a security breach. Around 2,000 approved transactions were sent to a single wallet from users' segregated wallets. Immediately thereafter, Bitcoin's trading price plunged by 20%, causing the value of the stolen Bitcoin to dip to US$58 million. After learning of the breach, Bitfinex halted all Bitcoin withdrawals and trading and said it was tracking down the perpetrators of the hack. Exchange customers, even those whose accounts had not been broken into, had their account balance reduced by 36% and received BFX tokens in proportion to their losses. The exchange's access to U.S. dollar payments and withdrawals was then curtailed. The hack happened even though Bitfinex was securing the funds with BitGo, which uses multiple-signature security.

In July 2023, Bitfinex worked with the Department of Homeland Security to recover about $315,000 in cash and cryptocurrencies stolen in the 2016 breach. The funds will be redistributed to holders of Bitfinex's Recovery Right Tokens, digital coins issued to people who suffered financial losses due to the hack.

Laundering
In early 2017, small amounts of the stolen bitcoin began to be moved from the wallet it had been initially stored in to the Dark Web marketplace AlphaBay with the intention of laundering it. After AlphaBay was shuttered by international law enforcement led by the FBI, the money was rerouted to the Russian marketplace Hydra. The shutdown of AlphaBay may have given law enforcement access to the service's internal transaction logs and allowed it to identify the perpetrators.

In February 2022, a New York couple, Ilya Lichtenstein (aged 34) and his wife Heather R. Morgan (aged 31), were charged by US federal authorities with conspiring to launder the bitcoin, which was worth US$5.3 billion at the time. Lichtenstein was an entrepreneur who had co-founded a sales company called MixRank. Morgan was an entrepreneur, columnist for Inc. and formerly a Forbes contributor (from 2017 to 2021). She also released rap videos on Youtube. Neither of them was charged with actually committing the hack. Law enforcement was able to acquire a search warrant for a cloud storage service used by Lichtenstein, obtaining a spreadsheet of wallet addresses linked to the hack, and their passwords. One of the wallets had around 94,000 Bitcoin. As the transactions were logged on the blockchain, law enforcement was able to track the money, and obtaining the passwords allowed it to seize it. The couple was charged in the case with a document known as an information, which is a type of charging document that federal prosecutors typically use when defendants have agreed to plead guilty.

Some of the funds were moved to more traditional financial accounts and spent on gold, NFTs, Uber rides and a PlayStation. Although hundreds of millions of dollars were converted to fiat currency, 80% of the Bitcoins remained in the original wallet at the center of the hack.

Shortly after the couple's arrest, Netflix ordered a documentary series that would cover the story of Lichtenstein's and Morgan's crimes.

In August 2023, Lichtenstein pleaded guilty to conspiracy to commit money laundering, and Morgan to one count of money laundering conspiracy and one count of conspiracy to defraud the United States. Lichtenstein additionally admitted to carrying out the hack.