From Hacker To Witness, Bitfinex Bitcoin Thief's Story Reveals Crypto Mixer

Bitfinex thief is a witness to the Bitcoin Fog (Doc; Photo. Coin Central)

JAKARTA - In 2016, the crypto world was shocked by a massive hack that befell Bitfinex, one of the largest crypto exchanges at the time. A total of 119,756 Bitcoins, which are now worth around IDR 67.8 trillion, were stolen by an unknown hacker. However, seven years later, the mystery came to light, after one of the hackers was arrested and became a state witness in another case involving crypto mixing service Bitcoin Fog.

As reported by CryptoPotato, Ilya Lichtenstein, 34, is the man behind the Bitfinex hack that resulted in huge losses to the crypto exchange. He was arrested in 2023 along with his wife, Heather Morgan, 31, on charges of money laundering and conspiracy to deceive the United States. The couple pleaded guilty and claimed to have used various ways to hide the origins of the stolen Bitcoin, including through crypto mixing services that cut transaction traces.

One of the crypto mixing services used by Lichtenstein is Bitcoin Fog, allegedly operated by Roman Sterlingov, a double Russian-Sweden citizen. The service is claimed to provide anonymity and privacy for crypto users, especially those involved in illegal activities on the dark web, such as drug trafficking. Sterlingov was arrested in April 2021 and tried in Washington, DC, on charges of money laundering, operating a money forwarding business without a license, and performing the necessary unlicensed money transmission in the District of Columbia.

Lichtenstein was a key witness at the trial, which took place this week. He testified about how he used Bitcoin Fog about ten times to wash part of Bitcoin stolen from Bitfinex, worth around IDR 54.1 billion. He said he chose the service because of its reputation as one of the oldest and most trusted crypto mixings. However, he also admitted that he later switched to other more effective services, such as Helix.

Sterlingov's lawyer, Tor Ekeland, tried to refute Lichtenstein's testimony by showing that there was no strong evidence linking his client to Bitcoin Fog. He also asked Lichtenstein's credibility as a witness, bringing up the use of drugs and fake identities used by him. Lichtenstein admitted that he bought mushrooms and LSD on the dark web, but he insisted that he was aware during the Bitfinex hack.

Lichtenstein also revealed the motive behind the Bitfinex hack, which he did together with an unnamed colleague. He said he was having financial problems with the tech startup he founded in San Francisco, and was bored with the business. He later recruited his wife, who called himself the Crocodile of Wall Street, to help him hide the stolen Bitcoin. His wife, who is a rapper, often exhibits their wealth on social media with a variety of luxury items.

The couple used fake identities to open an online account, and disguised transaction tracks by depositing and withdrawing funds through crypto exchanges and the dark web market. They also spent part of the stolen Bitcoin to buy non-fungible tokens (NFT), gold, and Walmart gift cards. However, their actions were exposed after US authorities managed to track and confiscate most of the stolen Bitcoins, worth around IDR 54.1 trillion.

Bitfinex hacking is one of the largest cryptocurrency theft cases in history, which rocked the crypto industry and raised doubts about the security and trust in crypto exchanges. Bitfinex itself had offered a reward of up to IDR 6 trillion for anyone who could help find the hackers. Bitfinex also said it had been working with the US Department of Justice since the investigation began, and would continue to follow the appropriate legal process to establish their right to Bitcoin stolen returns.