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Last week, the U.S. government made its largest asset seizure ever: $3.6 billion worth of bitcoin.
The money came from the 2016 hack of the Bitfinex exchange. The culprits: Ilya Lichtenstein and Heather Morgan, a young couple from New York City.
Perhaps the most interesting detail in this story is that approximately 24,000 bitcoins are still missing from this hack. They would be worth over $1.1 billion at current prices.
So where are they? Perhaps percolating around the same places where Lichtenstein and Morgan laundered theirs.
The criminal complaint alleges that the couple laundered some of their stolen coins using non-fungible tokens (NFT’s). This could explain why people will pay hundreds of thousands or even millions of dollars for an image of an ape.
If two criminals work together, trading the NFT between various accounts they control at ever-increasing prices, all they need is one bagholder to come in and make the illusion real. They take his money, give him the little jpeg, and laugh all the way to the bank.
Another fascinating aspect of this story is how they were caught:
The authorities said they traced the flow of funds through the unhosted wallets and across exchanges, according to the complaint, finding transactions that landed in accounts on exchanges that the two alleged launderers had in their real names. In one instance, according to the complaint, two of these accounts shared a login from the same location in New York.
This is a common mistake: mixing anonymous and real identities. Ross Ulbricht, creator of the Silk Road, did this by logging into his private VPN and his personal Gmail account from the same cafe in San Francisco.
If authorities find a pattern that when an anonymous account is used, your account also tends to be used from the same IP address, you’re going down.
In all, I think this case is good for the crypto industry. The less it seems like a free-for-all, the more legitimate it becomes.
The more legitimate it becomes, the broader adoption will be.
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