The topic of uncovering hackers who kept billions of stolen dollars in Bitcoin has been the big news this week. And it wasn't just the sheer volume of funds that contributed to it, but also the lifestyle of the aforementioned Heather Morgan. She was quite public: she posted music videos, wrote articles for popular publications and also shared her own songs. And because her image didn't fit the usual hacker look, the cryptocurrency community appreciated the story. We wrote more about her in a separate article.


Major cryptocurrency theft

Many cryptocurrency enthusiasts simply couldn’t believe how Morgan’s publicity and her hacking activities coexisted together. The suspect had long struggled to become a blogger, journalist and even a rap artist. In short, she was always in the public eye, though usually such criminals carefully conceal their identities. Anyway, by now we know that the US Department of Justice has seized $3.6 billion of the stolen money, arrested the couple and charged them. So how did they get caught?

According to Decrypt’s sources, Lichtenstein and Morgan allegedly used “many sophisticated money laundering techniques”. These include using fake identities to create online accounts, automating transactions and depositing stolen funds into the accounts of several darknet exchanges and trading platforms.

Authorities also reported investing stolen funds in gold and unique NFT tokens.

Elijah Lichtenstein and Heather Morgan

The couple managed to launder about 25,000 BTC over the past five years, then converted those coins into currency in bank accounts. The fraudulent scheme lasted for years, but the suspects were arrested only recently. It turns out that Lichtenstein had stored its private cryptocurrency keys in the cloud, which partly helped law enforcement.

We are talking about a cloud-based storage platform like Dropbox. It should be noted that storing private keys and any sensitive information on the internet is not an option, as this data can be accessed by hackers. The safest option in the case of crypto is the familiar hardware wallets.

After suspicion and approval of a search warrant the suspect was found to have a file containing information about more than 2,000 cryptocurrency wallets. There were also private keys to access these addresses. According to programmer Stephen Diehl, it was possible to catch the fraudsters because they ignored the principles of computer security.

At the moment, the confiscated bitcoins are “safely under the supervision of the United States government authorities”. It is not yet known what exactly will be done with the coins, but journalists are confident that they are unlikely to be returned to Bitfinex.

It should be recalled that last year the US government already auctioned off confiscated bitcoins. Although, the authorities never specified how the coins came to them or what they would do with the proceeds of the auction.

Heather Morgan

In February 2020, the US government also auctioned off around 4,000 BTC confiscated in the course of catching fraudsters and hackers. Nor should we forget the famous auction of 2014, when 30,000 BTC confiscated from the notorious darknet site Silk Road were sold.

In other words, bitcoins are unlikely to be returned to their original owners. On top of all this, law enforcement authorities could use the coins to reward informants on the activities of various darknet portals.

But what about the Bitfinex hack itself? It turns out that Lichtenstein and Morgan have not been charged with hacking the exchange. Ministry of Justice officials have confirmed that the cryptocurrencies found are linked to the transactions ambassador of the hacked trading platform, but it cannot yet be determined exactly whether the suspects interacted directly with the hackers and how the coins got to them.

That said, sources have already confirmed that the pair face a maximum of 20 years in prison in the case. The charges in this case were money laundering and conspiracy to defraud the US government.

Cryptocurrency fraud


We believe that this situation is also a reminder of the importance of keeping the private keys of one's own cryptocurrency addresses secure. Although the funds in this case were illegally mined, legally purchased coins should be carefully guarded. Otherwise, fraudsters or hackers are more likely to get hold of them, which could lead to serious losses.