Hacker Ilya Lichtenstein Gives Evidence Against Bitcoin Fog’s Roman Sterlingov

Key Takeaways

• Ilya Lichtenstein revealed his method of hacking Bitfinex in the Bitcoin Fog case.
• Lichtenstein, alongside his wife, previously pleaded guilty to a money-laundering conspiracy.
• The conspirator disclosed using Bitcoin Fog, among other mixers, to launder billions in the Bitfinex heist.

In a Washington court, Ilya Lichtenstein detailed his involvement in one of the largest Bitcoin heists. As a US witness, 

Lichtenstein shed light on the inner workings of crypto theft and subsequent money laundering. His testimony is part of the trial against Roman Sterlingov, accused of operating Bitcoin Fog, revealed a report  by Bloomberg.

The Bitfinex Heist Unveiled

Lichtenstein confessed to accessing Bitfinex’s systems for months, allowing him to siphon off 119,756 Bitcoin in 2016. Lichtenstein was called the mastermind behind the colossal Bitfinex Bitcoin heist. He has come forward as a cooperating witness for the US government in the ongoing trial against Roman Sterlingov, related to the Bitcoin Fog mixer service used for money laundering.

Facing up to 20 years in prison, Lichtenstein’s decision to cooperate with US authorities has unveiled facts in the case. He, along with his wife Heather “Razzlekhan” Morgan, gained notoriety as the “Crocodile of Wall Street.” She pleaded guilty to charges of money laundering connected to the hack.

Bitcoin Fog Money Laundering Tactics

During the trial, Lichtenstein admitted to using Bitcoin Fog, among other mixing services, to launder the stolen funds. Mixing services are designed to anonymize cryptocurrency transactions, making it difficult to trace their origins. Lichtenstein highlighted his shift from Bitcoin Fog to other services that better suited his laundering needs, quoted Bloomberg.

The Department of Justice (DOJ) had accused Bitcoin Fog in 2021 of laundering over 1.2 million Bitcoin, valued at approximately $335 million at the time of the transactions. The funds, primarily sourced from darknet marketplaces, were involved in a range of illegal activities, including narcotics trade, computer fraud, and identity theft.

Similarly, workings of crypto mixers like Sinbad and Tornado Cash came under the regulator’s radar and faced sanctions.In October 2020, the Financial Crimes Enforcement Network (FinCEN) imposed  a $60 million civil money penalty on the operator behind the Bitcoin mixers Helix and Coin Ninja for conducting operations of two unregistered money services businesses (MSB).

Cybersecurity Loopholes Exist

Ilya Lichtenstein’s testimony explains the mechanisms of cryptocurrency theft and money laundering while hiding from the authorities. His cooperation with federal prosecutors helped crack the complexities of tracking digital assets.

But that also means that the ongoing battle against illegal financial activities needs more resources. As the trial against Roman Sterlingov progresses, the crypto community should see how crypto mixer services will be impacted. Considering some are already sanctioned in the US.

About the Author

Shraddha Sharma

Shraddha has around five years of experience as a financial journalist, focusing largely on the Asian markets. Starting her career in Mumbai, India, as a news trainee and producer, she quickly found her niche in crypto. She is keen on learning how emerging technologies affect the broader markets and enjoys explaining complex financial ideas in a way that's easy to understand.

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