Judge Stops Release of Bitfinex Hack Laundering Suspects

A national justice has halted the merchandise of 2 individuals suspected of laundering proceeds from the 2016 Bitfinex hack.

Chief Judge Beryl Howell, of the U.S. District Court for Washington, D.C., stayed an earlier bid by a New York magistrate justice to merchandise Ilya "Dutch" Lichtenstein and Heather Morgan connected bail. The 2 were arrested Tuesday by national officials connected charges stemming from a 2016 hack of the Bitfinex cryptocurrency exchange. The U.S. Department of Justice besides said officials seized 94,000 BTC, worthy implicit $3.5 cardinal astatine today's prices.

Inner City Press first reported the quality precocious Tuesday. Howell's bid volition hold the couple's merchandise astatine slightest until her tribunal tin reappraisal the archetypal order.

Prosecutors sought pretrial detention during the proceeding this afternoon, arguing the brace mightiness beryllium a formation risk. Magistrate Judge Debra Freeman of the Southern District of New York sentenced Lichtenstein to location detention with a wearable GPS and a $5 cardinal bond, portion Morgan got the aforesaid with a $3 cardinal bond.

The parents of some defendants were required, arsenic a information of the bond, to pledge their homes arsenic collateral. The mates volition walk astatine slightest Tuesday nighttime successful jail, pending an probe by pretrial services officers.

The authorities initially asked for a $100 cardinal bond, which was rapidly rejected. The defence countered with $1 million, which was besides rejected.

Lichtenstein indispensable get signatures connected his enslaved from 5 people, the justice ordered. Morgan was required to get two, which her parents agreed to provide.

Defense attorneys told the tribunal that Morgan has wellness problems (including caller bosom surgery) and that incarceration would beryllium unsafe for her. She gets migraine headaches erstwhile exposed to agleam lights and had to spell to the infirmary Tuesday aft her apprehension astatine astir 7 a.m. Eastern time, her attorneys said.

According to a transgression complaint attached to the Department of Justice's property release, the 2 are some being charged with wealth laundering conspiracy and conspiracy to defraud the United States. They aren't being charged with conducting the hack itself.

An attached connection of facts further alleged that Lichtenstein and Morgan had power of a crypto wallet that held the proceeds from the 2016 hack, arsenic good arsenic galore different addresses. All told, the 2 were allegedly successful power of 2,000 antithetic addresses and their corresponding effect phrases, which were recorded connected a spreadsheet saved to a unreality retention work utilized by Lichtenstein.

According to Cornell Law School’s Legal Information Institute, the first charge carries a maximum condemnation of 20 years successful prison, nary much than doubly the worth of the spot progressive oregon both, portion the second charge carries a maximum condemnation of 5 years successful situation oregon a fine, oregon both.

Depending connected however the lawsuit proceeds, prosecutors tin question a lighter condemnation oregon a justice tin take to enforce a below-maximum sentence. Tuesday’s proceeding was intended to find whether the defendants would beryllium held successful pretrial detention.

Defense attorneys said the defendants person “been aware” of the probe since astatine slightest this past November aft 1 of their work providers received a subpoena, but had not fled up of their arrest. That was the crushed the justice said she granted bail.

Prosecutors said during the proceeding that the defendants had a record connected their machine titled "passport_ideas.txt” with accusation astir obtaining passports done darknet markets.

“Here's what I'm thinking, connected formation risk, the modular is simply a preponderance of the evidence. It's wide that the defendants person means, person traveled, and that the charges are serious. I'm troubled by the cloud-based relationship astir passports,” Freeman said during the hearing.

One of the defence attorneys said the record was meant to unfastened fiscal accounts, alternatively than to facilitate a formation to safety.

A integrative container afloat of cellphones, labeled "burner phones," was recovered nether the couple's bed, prosecutors said successful court.

As a information of their bond, the defendants are allowed to walk up to $10,000 a period connected surviving expenses but they are forbidden to drain their slope accounts oregon marque immoderate cryptocurrency transactions, the justice said.

Another condition: The couple's cellphones and computers volition beryllium confiscated and they volition beryllium fixed a flip telephone and 1 internet-connected device, monitored by pretrial services, truthful that they tin entree their slope accounts and email their lawyers.

Nikhilesh De contributed reporting.

UPDATE (Feb. 9, 00:15 UTC): Adds details from the proceeding throughout.

UPDATE (Feb. 9, 03:30 UTC): Updates with enactment of merchandise order.