What Is the Bitfinex Hack? Two Arrested in Plot to Steal $4.5B in Crypto

The Department of Justice (DOJ) announced the arrest of two individuals Tuesday over an alleged conspiracy that took place in 2016 involving the theft of $4.5 billion in cryptocurrency. Here is an explainer of the case:

What Is the Bitfinex Hack?

On August 2, 2016, an extensive cache of bitcoin was stolen from Bitfinex, a large cryptocurrency exchange owned by iFinex Inc. Hackers managed to exploit a security breach in the system and initiated more than 2,000 unauthorized transactions, per the DOJ.

The hacker made away with around $4.5 billion in stolen bitcoin and sent it to a digital wallet that was under the control of 34-year-old Ilya Lichtenstein, according to the department.

Lichtenstein and his wife, Heather Morgan, 31, allegedly conspired to launder the money per the DOJ. The department stated that over the last five years, Lichtenstein and Morgan transferred about 25,000 of the total 119,754 bitcoin through a complicated laundering process, and some of the funds were allegedly deposited into their own financial accounts.

About 94,000 bitcoin remained in another digital wallet that federal law enforcement and special agents were able to obtain control of, and through legal seizures, officers recovered more than 94,000 bitcoin that had been stolen from Bitfinex. The recovered bitcoin was valued at more than $3.6 billion at the time of seizure, according to the DOJ.

Chief Jim Lee of IRS-Criminal Investigation (IRS-CI) said the $3.6 billion that the Cyber Crimes Unit recovered is "the largest cryptocurrency seizure to date."

Bitfinex's Reaction to the Recovery of the Stolen Bitcoin

Lichtenstein and Morgan were arrested early Tuesday morning. According to the DOJ, the two have been charged with conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison, and conspiracy to defraud the U.S., which brings a maximum sentence of five years.

Following the DOJ announcement, a spokesperson for the Bitfinex company forwarded a statement to Newsweek on Tuesday, which read: "We are pleased that the U.S. Department of Justice has today announced that it has recovered a significant portion of the bitcoin stolen during the August 2016 security breach. We have been cooperating extensively with the DOJ since its investigation began and will continue to do so.

"Bitfinex will work with the DOJ and follow appropriate legal processes to establish our rights to a return of the stolen bitcoin. Bitfinex intends to provide further updates on its efforts to obtain a return of the stolen bitcoin as and when those updates are available."

The company also said that if it receives a recovery of the stolen bitcoin, it plans to use 80 percent of that to repurchase and burn certain bitcoin tokens.

"Today's arrests, and the department's largest financial seizure ever, show that cryptocurrency is not a safe haven for criminals," said Deputy Attorney General Lisa O. Monaco. "In a futile effort to maintain digital anonymity, the defendants laundered stolen funds through a labyrinth of cryptocurrency transactions. Thanks to the meticulous work of law enforcement, the department once again showed how it can and will follow the money, no matter what form it takes."

Updated 2/9/22, 9:08 AM ET: The story has been updated with Bitfinex's statement attributed to the company's spokesperson.

Bitcoin Cryptocurrency Value Goes Down : Illustration
The arrest of two individuals who allegedly conspired to launder at least $4.5 billion in stolen bitcoin from Bitfinex in 2016 took place on Tuesday morning. In this photo illustration, a visual representation of the digital Cryptocurrency, Bitcoin is displayed in front of the Bitcoin course's graph of Bitfinex cryptocurrency exchange website on November 20, 2018 in Paris, France. Chesnot/Getty Images