The main suspect in the Bitfinex incident has turned into a witness for the Money Laundering case.

In 2022, Ilya Lichtenstein and Heather Morgan were arrested for allegedly laundering $4.5 billion in cryptocurrency assets stolen from a trading platform that was hacked. The couple subsequently confessed to their crimes.

Recent news indicates that Liechtenstein is currently participating as a government cooperating witness in a money laundering trial against the cryptocurrency mixing service Bitcoin Fog. This development has raised concerns about the ins and outs of virtual currency money laundering cases.

Event Review

To help readers better understand this complex case, here is a timeline of the main events:

• 2016: A couple from Liechtenstein stole $4.5 billion worth of Bitcoin from a trading platform.
• April 2021: Law enforcement arrested Roman Sterlingov, the main operator of Bitcoin Fog.
• 2021: Multiple cryptocurrency mixing platforms involved in Money Laundering were shut down.
• February 1, 2022: The government wallet received a massive transfer of approximately 94,643.3 bitcoins.
• February 2022: The Liechtenstein couple was arrested.
• August 2023: Two people pleaded guilty to theft.

Liechtenstein revealed during the plea that they were able to access the system of a certain trading platform for a long time and stole a large amount of funds. They had repeatedly used Bitcoin Fog for Money Laundering and later switched to other mixing services.

From Suspect to Witness

In a recent trial, Liechtenstein testified that they used Bitcoin Fog for money laundering approximately 10 times, before turning to what he believes are superior mixing services. He emphasized that the use of mixing services was only a small part of their money laundering activities, with most of the funds being deposited into cryptocurrency trading accounts registered with identity information purchased on the dark web.

Liechtenstein stated that he has never directly communicated with the operator of Bitcoin Fog, Strelkov, and does not know him. It is worth noting that law enforcement accused Bitcoin Fog of money laundering over 1.2 million Bitcoins in 2021, which was worth about $335 million at the time. These funds primarily came from the dark web markets and involved illegal activities such as drug trafficking, computer fraud, and identity theft.

Facing up to 20 years in prison, Liechtenstein chose to cooperate with authorities, revealing more details of the case. This move illustrates the complexity of cryptocurrency crime networks and the challenges law enforcement faces in combating such crimes.

As of February 27, 2024, the trial in this case is still ongoing, and the jury has not yet reached a final verdict.

Regulatory Challenges Facing Cryptocurrency Mixers

Apart from Bitcoin Fog, other cryptocurrency mixers such as Sinbad and Tornado Cash are also under strict scrutiny from regulators due to their potential use in illegal activities. In October 2020, law enforcement imposed a civil penalty of $60 million on the operators of Helix and Coin Ninja for operating unregistered money service businesses.

Suggestions for Strengthening Anti-Money Laundering Measures

Given the complex Money Laundering techniques used by the Bitfinex attackers, here are some suggestions to strengthen anti-money laundering measures:

1. Strengthen KYC and AML regulations: Virtual asset service providers should require users to undergo comprehensive identity verification to ensure compliance with relevant regulations.

2. Real-time monitoring of transactions: Implement advanced monitoring systems to analyze information such as transaction amounts, frequency, sources, and destinations, and promptly identify suspicious activities.

3. Establish an effective reporting mechanism: Set up a system to report suspicious transactions or activities, and work closely with regulatory authorities for investigations.

4. Strengthen industry collaboration: Virtual asset service providers should maintain close communication with security companies, regulatory bodies, and law enforcement agencies to jointly address the evolving Money Laundering strategies.

As criminals continuously adjust their strategies and adopt more decentralized and covert trading methods, ongoing collaboration and information sharing within the industry become particularly important. Only by continuously improving anti-money laundering measures can the cryptocurrency industry establish a safer and more transparent ecosystem.