- Hackers reportedly stole $20 million from a US government-linked crypto wallet with seized funds.
- Complex money laundering tactics include nested exchanges using Binance liquidity for money transfers.
The rise in cryptocurrency use has unfortunately been accompanied by an increase in scams and cyber-attacks, highlighting the vulnerabilities within the digital asset space.
U.S. government-linked crypto wallet is under threat
In a recent incident, hackers reportedly infiltrated a US government-linked crypto wallet containing seized Bitfinex funds.
They stole approximately $20 million worth of various assets, including Tether [USDT]USD coin [USDC]and Ethereum [ETH]the blockchain intelligence agency said Arkham.
The company further noted that someone quickly converted the stolen stablecoins to ETH and routed them through multiple addresses marked as ‘Binance Deposit’.
“The funds were moved to wallet 0x348, which started selling the funds to ETH. We believe that the attacker has already started laundering the proceeds through suspicious addresses linked to a money laundering service.”
Unexpectedly, the crypto community reacted with a wave of humor when they heard the news.
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Arkham too pointed out that the US government had withdrawn $5.4 million from Aave shortly before the hack. It added,
“This is their first activity at this address in 8 months.”
The Bitfinex Hack – Explained
In 2016, Ilya Lichtenstein and Heather Morgan orchestrated a high-profile hack on the Bitfinex exchange. 120,000 Bitcoin was seized in the hack [BTC]now valued at approximately $8.2 billion.
US authorities arrested them in 2022, leading to the seizure of these stolen assets. This was the largest ever recovery of digital assets by the Department of Justice.
After they have a plead deal in July 2023, both admitted charges of money laundering and conspiracy against the US government. Now they face reduced sentences.
Prosecutors have asked for an 18-month prison sentence against Morgan. Mainly because of her smaller role in the plan and cooperation with law enforcement agencies.
While Lichtenstein, who was initially sentenced to 20 years in prison, is expected to receive a five-year sentence for cooperating with investigators and having no prior criminal offenses.
ZachXBT intervenes
Pseudonymous blockchain researcher ZachXBT responded to Arkham’s report, in which he describes the hack as “nefarious” and calls it a clear case of theft.
He noted that the hackers moved Ethereum in increments of $40,000 to what appeared to be a deposit address linked to Binance.
He later though clarified that these transactions were conducted through a ‘nested exchange’. He did this by leveraging Binance’s liquidity, rather than directly involving the Binance platform itself.
“It’s not Binance, it’s a nested exchange that uses Binance for liquidity.”
This nuanced approach shows how complex money laundering schemes can hinder the exact path of stolen funds in the crypto space.