- The alleged launderers behind the 2016 Bitifnex hack were arrested yesterday
- Heather Morgan and Ilya Lichtenstein were arrested in New York after investigators linked them to the hack, today worth $4.5 billion
- Several interesting revelations have come out of the events
Yesterday saw the sensational arrest of self-styled entrepreneur and Forbes writer Heather Morgan and blockchain investor Ilya Lichtenstein on suspicion of conspiring to launder $4.5 billion in bitcoin stolen from Bitfinex in 2016. Lots of interesting and frankly strange information has come out since the arrest, so we break down the five most intriguing developments relating to the arrest.
Morgan Was Interviewed Over Cybersecurity
Heather Morgan was one of the ‘experts’ asked by BitGo to contribute to a Forbes piece in 2020 (in her name) on the subject of, get ready for this, protecting businesses from cyber criminals! Not only is this staggeringly ironic in itself, but the story gets more farcical when you learn that Bitfinex’s wallet security at the time of the hack was provided by, you guessed it, BitGo.
Morgan wasn’t exactly one for keeping her head down and using her ill-gotten gains to quietly set herself up for life. Instead, she flashed the cash and what she had bought with it on her various social media channels, performing self-penned songs under the rapper name Razzlekhan:
This “rapper” with an alias of RAZZLEKHAN aka Heather Morgan was charged today in NYC, with being part of money laundering scheme that involved Billions worth of Bitcoin.
I believe she should have already been in prison for life for whatever this is. pic.twitter.com/CwHVH4kf7y
— Letting Go (@ProvideContext) February 8, 2022
Way to keep a low profile.
Private Keys Kept in the Cloud
The private keys for the ₿94,000 still left in the wallet that originally received the bitcoin stolen from the Bitfinex hack were stored on a retail cloud storage service in plain text. As we know from the Craig Wright pineapple hack case, even encrypted files in the cloud aren’t safe, and yet $3.6 billion in bitcoin was protected just by a password and maybe a 2FA.
Assuming this was the hackers’ bitcoin that they were planning to move at a later date, they will not be best pleased to find out this was how their fortune was being safeguarded.
Bitfinex Will Get the Bitcoin Back
Unlike with Mt. Gox, the retrieved bitcoin will not be sent out to individual users affected by the loss (Bitfinex took care of this at the time). Instead, it will all be given back to Bitfinex who will likely use it to buy back and burn their own LEO tokens (see below). So while this might create selling pressure on LEO tokens, it won’t do anything to the Bitcoin price…relax.
LEO Token Benefits Ahead of Buyback and Burn
Bitfinex’s LEO token jumped 50% on the news, but this was after it had already risen 46% in the prior week. This has led some to believe that a bout of insider trading was going on, bearing in mind that the LEO token whitepaper stipulates that if the money from the hack is ever returned to Bitfinex, the exchange will use an amount equal to 80% of the recovered funds to repurchase and burn outstanding LEO tokens.
At current prices, this would mean that $3.6 billion worth of LEO could be bought back and burned by Bitfinex, equating to a near 50% reduction in the coin’s market cap.
Tip of the Iceberg?
While this is already some crazy stuff to get your head around, something tells us that what we’ve learned in the last 24 hours is just the start and there is much more crazy still to come in the story of the 2016 Bitfinex hack and this mad pair of alleged launderers.