Cryptocurrency is all the rage among young investors. It allows investors to contribute to the blockchain’s pivotal technological advancement while making money. However, the things that make crypto great are also the things that make it risky. One couple took an unethical approach to cryptocurrency and stole billions. Here is what you should know.
Ilya Lichtenstein and Heather Morgan
A few years ago, Ilya Lichtenstein and Heather Morgan lived up and uplifted fellow millennials to invest in cryptocurrency. The couple posted aspirational videos, did interviews, and hosted forums on digital investing and were the faces of crypto success.
By all accounts, Lichtenstein and Morgan were the first family of the crypto world. They were the ultimate investors with the most valuable yields, and for many people, they brought crypto out of Reddit forums and into the limelight.
However, the excitement and wealth came at the cost of privacy when the couple hacked over 2,000 users and disrupted the crypto ecosystem. At the center of this security hack were Lichtenstein and Morgan.
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Understanding Bitcoin
The concept of cryptocurrency centers around the blockchain. For Lichtenstein and Morgan, Bitcoin was the crypto of choice. Early in the 2010s, cryptocurrency was more theoretical than practical and few investors were willing to put money into such an experimental field.
The blockchain is revolutionary because it has enormous data capacity and remains impenetrable thanks to data encryption. The block chain is a digital storage system that holds vast amounts of information in an encrypted block. Once the block is full, new information is stored in the next block on the chain and so on. This is a remarkable upgrade for privacy and data storage.
Crypto, digital currency, is stored on the blockchain. The purpose of cryptocurrency is to provide users with a completely unregulated “wild west” transactional experience. Buyers could trade crypto, make purchases, and grow their wealth over time as long as they kept their privacy key.
Because cryptocurrency is unregulated and dependent on encryption, buyers get a unique privacy key that is unique. Users receive only one key and cannot replace the key if lost. Once a user loses their key, their digital wallet and all of their crypto is lost forever.
There are no procedures for key recovery, and crypto is a finite digital resource meaning there is only a small amount of Bitcoin in the world with no guarantee that the creator will make more. This makes crypto extremely valuable, and as the popularity increased, so did the value.
The Hack
Around 2016, Bitfinex, the largest cryptocurrency exchange (think: stock market), suffered a security breach. Over 2,000 transactions were approved and sent to one wallet. The value of Bitcoin nosedived by 20% within a few hours.
At the time, no one knew who was responsible or even where to look, and there was no investigative regulatory body that handled cryptocurrencies. The money from the hack slowly made its way out of the wallet and into dark web currency exchanges to ensure that it couldn’t be hacked. Eventually, the crypto was rerouted to Russia and an untraceable wallet through a “labyrinth of cryptocurrency transactions,” according to investigators.
At some point, the funds came into accounts held by Lichtenstein and Morgan, who laundered the money by buying gold, NFTs, gift cards, and other expensive purchases. The couple converted hundreds of millions of dollars in Bitcoin into real cash and continued to fund their lavish lifestyle.
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Catching the Crypto Couple
By 2021, researchers and coders had made significant strides to create more sophisticated tracking mechanisms for the blockchain. This development led to the identification and tracking of the hack money from 2016. Law enforcement obtained a search warrant for the couples’ iCloud account, where they found passwords to accounts with over 94,000 Bitcoin.
Once law enforcement cracked the accounts, the entire scam fell apart. They connected Lichtenstein and Morgan to billions of dollars worth of Bitcoin transactions and followed the trail back to the Bitfinex breach.
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What This Means for Cryptocurrency
The couple is charged with conspiracy to commit money laundering and conspiracy to defraud the United States. Their crimes were so extensive that their case could not be pinned down to a specific jurisdiction. Most fraud charges are handled in federal court, but this case, in particular, is getting national attention.
The ability to track Lichtenstein and Morgan through the convoluted trail of transactions and trades on the blockchain has implications for crypto crimes in the future. This case sets a precedent: if law enforcement has found a way to track crypto more efficiently by using the blockchain itself, shady business on the dark web is likely to come to light sooner rather than later.
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