Ilya Lichtenstein, the man behind the looting of billions of dollars from Bitfinex, is now helping federal prosecutors build a case against Bitcoin Fog, a crypto mixing service.
Lichtenstein pleaded guilty to money laundering charges last year after hacking Bitfinex and looting $3.6 million worth of Bitcoin.
Lichtenstein testifies in Washington trial
According to Bloomberg, Lichtenstein appeared this week in a trial in Washington, DC, in which Roman Sterlingov was accused of running a mixing service used by dark web criminals. The Bitfinex hacker has been named as a cooperating witness for the US government on money laundering allegations related to the platform.
Lichtenstein told the jury that he used various mixers, including Bitcoin Fog, to conceal the stolen funds from the Bitfinex hack. He said he used the service to launder money about ten times. However, he mentioned that the platform was not his main method of laundering money as he later switched to other services more suitable for his purpose such as Helix.
U.S. authorities accused Sterlingov, a Russian-Swedish dual citizen, of running the money-mixing service. They accuse Sterlingov of receiving millions of dollars from darknet markets linked to the trafficking of illegal drugs.
Tor Ekeland, Sterlingov's lawyer, argues that there is no evidence such as server logs and eyewitness accounts linking Lichtenstein to the platform. Ekeland continued to press Lichtenstein during the trial as to whether he knew or had communicated with the defendant, which he denied.
The attorney then asked about Lichtenstein's drug use and referred to previous statements in which Lichtenstein admitted to purchasing mushrooms and LSD on darknet markets. However, he clarified that he was sober during the hacks.
Sterlingov faces multiple charges, including money laundering, operating an unlicensed money transfer business and engaging in money transfers without the required license in the District of Columbia.
Bitfinex hacker reveals motive
During his testimony, Lichtenstein highlighted the reason for the Bitfinex hack in 2016, saying he was having problems with his San Francisco tech startup. He further explained that over time he became burned out by the difficult business. He later hired his wife, Heather Morgan, to help conceal the source of the funds. Morgan, who called herself the “Crocodile of Wall Street,” sought notoriety on social media by rapping about investment strategies.
The government alleges that the couple used fake identities to set up online accounts and obscure the transaction path by depositing and withdrawing funds through cryptocurrency exchanges and darknet markets. According to the government, some embezzled funds were used to purchase non-fungible tokens (NFTs), gold and Walmart gift cards.
In August 2023, Lichtenstein and his wife officially pleaded guilty to money laundering and conspiracy to commit fraud, ending a seven-year mystery.
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