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Cryptocurrency scam: Bitcoin & Clyde

The first FBI raid took place around 3 a.m. in the summer of 2021. The unmarked vehicle stopped in front of 75 Wall Street, a luxurious 43-story building located in the business district of Manhattan. Federal agents crossed the white oak lobby and walked straight towards the night receptionist. “We picked up an abnormal signal,” said one of them. It appears that someone in this building is engaging in child pornography. We need to get on the roof to figure out where the signal is coming from. A few moments later, the agents left empty-handed.

The following weeks, they will come back a second, then a third time. At one point, the receptionist asks them, “Are you sure you’re in the right building?” In my opinion, what you are looking for is more at 95 Wall Street. A less opulent building where the police made a series of arrests and drug seizures: the address served as a den for dealers, when it did not host clandestine Airbnb parties. A luxury escort was even killed there. His body, concealed in a 200-litre barrel, was found in New Jersey. “We are in the right building,” the officers respond.

In reality, they are investigating a theft of bitcoins that took place in Hong Kong five years earlier, in the summer of 2016: the Bitfinex cryptocurrency trading platform had been stolen 119,754 bitcoins, a loot of approximately $72 million. After five years of shadowing, climbing onto rooftops and wandering around in the heart of the night, the feds have finally identified the two perpetrators of this cyber-attack. It must be said that they do not have the profile of the job: at first sight, Ilya Lichtenstein and Heather Morgan form a couple of thirty-year-olds without history. He is Russian-American and works for an investment fund, she is American and presents herself as an entrepreneur, journalist and rapper.

That was just the beginning of the surprises: in the ever-changing world of crypto-crime, this case remains one of the most intriguing to this day.

Like a jet encrusted with diamonds

Ah, bitcoin: the currency of the future! This invention/ideology which was to announce an abundant and abundant financial techno-utopia! No one saw it coming, and anyone who claims otherwise is either a liar or a billionaire who made his fortune from bitcoin. The global amount of cryptocurrencies today is estimated at $3 trillion, and the world’s largest financial institutions, including the Bank of England, see these digital currencies as the future of finance.

Alas, the rise of cryptocurrencies has spawned a new type of crime. Hackers have invented new methods of extortion, such as ransomware, or “rançongiciel” in French. This attack consists of paralyzing the computer system of a company or an individual, before unlocking it against a ransom payable in cryptocurrency. According to a report published last year by the FBI, there are now 4,000 ransomware attacks per day (compared to seven bank robberies), and nearly $14 billion in bitcoins were stolen in 2021 (traditional robbers, in comparison, only pocketed a few hundred million). Hospitals are sometimes targeted, banks stop working. Recently, a meatpacking plant even had to pay a ransom of $11 million in bitcoins to recover its beef steaks, chicken cutlets and other pork sausages.

But the Bitfinex hack, which led the Feds to 75 Wall Street, is on a whole different scale.

At the material time, in 2016, a bitcoin was worth around $600. Then its value soared to $69,000 last year. It’s a bit like Ilya Lichtenstein and Heather Morgan hid a stolen Ferrari in their garage and it turned into a jet encrusted with gold and diamonds overnight. How the hell were they going to cover it up?

In principle, the funds are stolen by criminal groups sponsored by rogue states (Kuwait, Iran, North Korea), then used to buy illegal weapons and finance terrorist cells. To address these threats, a new surveillance industry has sprung up in Silicon Valley. Groups like TRM Labs and Chainalysis are now hired by governments or companies to observe every bitcoin transaction.

Unlike a traditional heist, arresting the perpetrators of a bitcoin scam is difficult. Here, no briefcase full of cash, no fingerprints. When a hacker commits a crime online, it is almost impossible to trace them. Unless, of course, you catch him in the act.

Find the rest of our investigation in issue 106 of Vanity Fairin newsstands




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