The Department of Justice announced the seizure of 94,000 bitcoins stolen from Bitfinex in 2016. The breakthrough in the case is indicative that Bitcoin transactions can be tracked despite some obfuscation tools.
The CEO of Binance,said that cryptocurrencies are easier to track than fiat. Changpeng Zhao, popularly known as CZ stated this in a tweet on Wednesday, February 9 after the US Justice Department announced that it has seized $3.6 billion worth of bitcoins stolen from Bitfinex in a 2016 hack.
One-Sixth of Total Volume of Bitfinex Was Hacked
The 94,000 bitcoins seized by the DoJ were part of the 120,000 stolen from the exchange in a hack that took one-sixth of the exchange’s total trading volume.
The hacker moved the coins through a series of convoluted channels in order to conceal their movement in what US officials termed “unauthorized transactions” to launder the funds which ended up in wallets controlled by a New York couple, Ilya “Dutch” Lichtenstein and Heather Morgan.
Apparently, part of the elaborate obfuscation of the bitcoins involved channeling them through the dark-net, such as the popular AlphaBay marketplace.
Tracked And Traced
The statement of fact deposed by Christopher Janczewski, an investigator with the Internal Revenue Service, Criminal Investigation (IRS-CI) stated that the agency tracked the bitcoins despite the effort of the hacker(s) to conceal them through various channels and layers of concealment tools.
He said that the authorities traced the missing funds on the BTC blockchain from around January 2017. According to the affidavit:
“A portion of the stolen BTC moved out of Wallet 1CGA4s in a series of small, complex transactions across multiple accounts and platforms. This shuffling, which created a voluminous number of transactions, appeared to be designed to conceal the path of the stolen BTC, making it difficult for law enforcement to trace the funds. Despite these efforts, as explained further below, U.S. authorities traced the stolen BTC to multiple accounts controlled by ILYA “DUTCH” LICHTENSTEIN, a Russian-U.S. national residing in New York, and his wife HEATHER MORGAN.”
Even though it took the authorities 5 years to trace the holders of the Bitfinex bitcoins, it is a testimony to the fact that blockchain analysis is more advanced than many are aware. Bitcoin is not a privacy coin and has never been promoted as one. What is not clear is if the hacked coins could have been traced if they were a privacy coin such as monero.