Lichtenstein said he used Bitcoin Fog to conceal stolen funds from the Bitfinex hack, laundering money through the service multiple times.
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 getting away with Bitcoin worth $3.6 million.
Lichtenstein Testifies in Washington Trial
According to Bloomberg, Lichtenstein appeared in a Washington, D.C., trial this week where Roman Sterlingov was accused of operating a mixing service utilized by dark-web criminals. The Bitfinex hacker was named a cooperating U.S. government witness to charges relating to money laundering associated with the platform.
Lichtenstein told the jury that he used different mixers, including Bitcoin Fog, to obscure the stolen funds from the Bitfinex hack. He testified that he used the service about ten times to launder funds. However, he mentioned that the platform was not his main money laundering method since he later moved on to other services better suited for his purpose, such as Helix.
U.S. authorities charged Sterlingov, a dual Russian-Swedish citizen, with operating the money-mixing service. They accuse Sterlingov of receiving millions of dollars from darknet markets associated with trafficking illegal drugs.
Tor Ekeland, Sterlingov’s attorney, argues that no evidence exists, such as server logs and eyewitness accounts that link Lichtenstein to the platform. Ekeland further pressed Lichtenstein during the trial on whether he knew or communicated with the accused, which he denied.
The attorney then inquired about Lichtenstein’s drug use, referencing earlier testimony where Lichtenstein admitted to purchasing mushrooms and LSD on darknet markets. However, he clarified that he was sober during the hacks.
Sterlingov is facing multiple charges, which include money laundering, operating an unlicensed money-transmitting business, and engaging in money transmission without the requisite 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 faced issues with his tech startup in San Francisco. He further explained that during the time, he was burnt out from the struggling business. Later, he recruited his wife, Heather Morgan, to aid in concealing the origin of the funds. Morgan, who called herself the “Crocodile of Wall Street,” sought social media recognition by rapping about investment strategies.
The government alleges that the pair utilized counterfeit identities to establish online accounts, masking the transaction trail by depositing and withdrawing funds through cryptocurrency exchanges and darknet markets. According to government assertions, some embezzled funds were allocated to purchase nonfungible tokens (NFTs), gold, and Walmart gift cards.
In August 2023, Lichtenstein and his wife formally pleaded guilty to money laundering charges and conspiracy to commit fraud, ending a mystery that spanned seven years.