The revelation from hacker Ilya Lichtenstein sheds light on one of the largest Bitcoin heists in history, involving the looting of billions of dollars from the crypto exchange Bitfinex using Bitcoin Fog.

Ilya Lichtenstein, a prominent figure in the crypto industry known for his involvement in high-stakes criminal activities, has taken the stand as a witness for federal prosecutors in the trial of Bitcoin Fog, a mixing service associated with concealing illicit assets.

Bitfinex Hacker Used Bitcoin Fog To Conceal Origin

According to Bloomberg, Lichtenstein appeared as a cooperating witness for the US government. He disclosed to a jury how he gained access to Bitfinex’s systems over several months and infiltrated individual accounts at other crypto exchanges like Coinbase and Kraken. 

Last year, Lichtenstein and his wife, a social media rapper known as Heather Morgan, pleaded guilty to a money-laundering conspiracy linked to the hack. During his testimony, Lichtenstein revealed his use of a service called Bitcoin Fog on multiple occasions to launder some of the stolen money. 

Lichtenstein is now helping federal prosecutors in their case against Bitcoin Fog, one of the mixing services he said he’d used to conceal assets.

US prosecutors have accused Roman Sterlingov of operating Bitcoin Fog, alleging it received substantial amounts of money from darknet markets notorious for illegal drug trafficking.

Sterlingov’s attorney, Tor Ekeland, countered these claims, stating that there’s insufficient evidence linking his client to the operation of the mixer.

Roman Sterlingov, a dual Russian-Swedish national, was arrested and charged with money laundering for operating the mixing service in 2021. He is currently on trial for his alleged involvement in the operation of Bitcoin Fog.

During the trial, Lichtenstein denied any knowledge of or communication with Sterlingov. His testimony also implicated his wife, Heather Morgan, in helping hide the source of the stolen funds. 

Ilya Lichtenstein’s testimony offered insights into the motives behind the 2016 Bitfinex hack and his laundering methods. He cited business struggles with his tech startup in San Francisco as a primary motivator for the hack, stating that he felt burnt out at the time. 

Couple Admits to Laundering Billions in Stolen Bitcoin Through Crypto Exchanges and Darknet Markets

Lichtenstein detailed his approach, which included saving customer passwords from Bitfinex to access accounts on other exchanges.

While he utilized various mixers to obscure the origins of the stolen funds, he testified that the majority of the laundering process didn’t involve such services. 

Despite using various mixers to obfuscate the origins of the stolen money, Lichtenstein disclosed that he primarily laundered the funds by depositing them into crypto exchanges using accounts in the name of other individuals purchased on the darknet.

He also mentioned switching from Bitcoin Fog to other mixers like Helix, operated by Larry Harmon, as they better suited his purposes.

The couple allegedly used fake identities to set up online accounts and obscured the trail of transactions by depositing and withdrawing funds from various platforms, including crypto exchanges and darknet markets.

Additionally, Lichtenstein admitted to purchasing mushrooms and LSD on darknet markets but clarified that he remained sober while executing the hacks.

Lichtenstein admitted to executing the 2016 Bitfinex attack and enlisted his wife to help conceal the origin of the stolen funds. The couple allegedly used fake identities to set up online accounts and conducted transactions through crypto exchanges and darknet markets, funneling some of the stolen money into nonfungible tokens, gold, and Walmart gift cards, according to the government’s claims.

At the time of their arrest, the US government alleged that Lichtenstein and Morgan conspired to launder $4.5 billion in stolen Bitcoin, with $3.6 billion seized, marking the largest financial seizure in history.

Subsequently, an additional $475 million tied to the hack was seized.

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