A transfer of $20 million worth of crypto has been detected from an account under the control of the US government to a new wallet, which has caused certain suspicions of a possible hack and, consequently, theft and money laundering. In addition, it has called into question the security of the funds in the hands of the authorities.
Source of Funds: Bitfinex Wallet Hack
To fully understand the facts, it is necessary to go back to 2016, when the Bitfinex cryptocurrency exchange was the victim of a hack where hackers managed to steal around 120K bitcoins (BTC).
At the time, the 119,754 BTC stolen were worth $71.8 million. Today, with the cost of BTC at $68,000, the stolen amount is worth about $8.15 billion.
In an effort to mitigate the effects of the attack, the US government managed to recover a sizable portion of the stolen BTC, placing it in a wallet known as the Bitfinex Hack Wallet.
Years later, in February 2022, authorities arrested the hack suspects: Ilya Lichtenstein and his wife Heather Morgan. Both were charged and eventually pleaded guilty to money laundering and fraud.
Lichtenstein, cooperating with authorities in other investigations, received a relatively short sentence of five years in prison, while Morgan, also known for her artistic career as the rapper “Razzlekhan,” was sentenced to 18 months in prison, a sentence she has already served.
Suspicious transactions and crypto tracking
Knowing this, Arkham Intelligence, a company specializing in blockchain security, detected the cryptocurrency transfer and alerted its community on social media.
Initially, it was thought that the authorities were responsible for this activity, but then inconsistencies appeared.
According to Arkham Intelligence, the alleged attacker withdrew over $5.4 million in crypto from the decentralized lending platform Aave, sending it to a new wallet address created just five days earlier. Strangeโฆ
This was followed by another transfer of $1.12 million in USDT. Strange when there had been no withdrawals for 8 months. And even more so when the user behind this wallet began sending tokens to another address associated with money laundering. Plain and simple, milk.
They also detected other movements of $446,000 in Ethereum (ETH) and $13.7 million in aUSDC, a USD Coin token that generates interest through staking on Aave.
But, to make matters worse, the hacker or group responsible for these events has also moved a portion of the funds to instant exchanges, which allow cryptocurrencies to be converted quickly without the need to open an account or go through KYC verifications. Ideal for money laundering.
The sustained activity of this Bitfinex Hack Wallet, now deemed compromised, has heightened the vigilance of security experts.
Increased security
In total, authorities recovered some $3.6 billion of funds stolen in the Bitfinex attack. A portion of these funds were returned to Bitfinex, but the current events call into question the security of the remaining assets.
And it highlights the need to improve the protection mechanisms for funds recovered in security incidents, even in the custody of authorities.