Yahoo Finance's David Hollerith discusses U.S. officials seizing $3.6 billion in bitcoin from the 2016 Bitfinex hack and the arrests of TikTok rapper Heather Morgan and Ilya Lichtenstein on allegations of laundering the cryptocurrency.

Video Transcript

JULIE HYMAN: All right, we are going to turn to another hot story that we have been watching that I think has sort of seized on the imagination and attention of a lot of different crosscurrents, market participants, crypto market participants, and just regular people who like heist movies, I suppose-- I don't know.

We had the news yesterday, the Justice Department announcing that they had seized $3.6 billion worth of Bitcoin related to a hack that dates back to 2016 of the Bitfinex platform. And our David Hollerith has been tracking this story for us. I mean, this story has everything, right? You have a big hack. You have a big theft. You have a very colorful couple at the center of all of this, David.

DAVID HOLLERITH: Yeah, it's unbelievable, actually. There's a lot to unpack here. I think one place to start is the amount of funds that have been seized by the DOJ is now amounting to something, like, $4.1 billion, according to Bitcoin's market value. Now, obviously, that's going to change a lot. But I think this underlines the point that this is one of the biggest seizures ever. I was talking to someone from VRM Labs, who's-- it's a blockchain analytics company. And previously, he'd worked for the US Treasury. And he just kept underlining the point here that we've never seen sort of a governmental seizure of this size.

Now the funds in question came from a 2016 hack of the cryptocurrency exchange Bitfinex. And actually, people who watch the blockchain, mostly these analytics companies, but anyone who wants to, has been looking at these Bitcoin wallets where the hacker essentially took the funds, seized the funds from Bitfinex, and transferred it to that wallet. They've been watching that wallet for a number of years.

And there's been a few things that have happened, a few developments. It's been a complicated network of kind of trying to move those funds around the blockchain so that, you know, the hackers could somehow get the funds off of the blockchain and turn it into cash where they could potentially use it.

But that's the problem with the blockchain, as we've seen. For criminals, it's the great advantage is a lot of people tout is that the transparency makes it extremely difficult to launder funds. So going back to what happened, this wallet was pinpointed to belong to 34-year-old Ilya Lichtenstein and Heather Morgan, who's 31 years old. Now these two people are not necessarily alleged to be the hackers of the 2016 Bitfinex. At this point, what they're considered to be are the money launderers for the illicit funds.

And through a series of tracking these-- the flow of funds on the blockchain, sort of a combined task force through several different departments, the prosecutors from the DOJ, along with the IRS and criminal investigations unit and Homeland Security and the FBI, were able to sort of get search warrants on some of their accounts.

And through those search warrants, they were able to get the private key or Bitcoin wallet password to this wallet that held most of the stolen funds from the Bitfinex hack and were thereby allowed to seize it. So there's still not all of the $4.5 billion stolen in the hack has been seized, but at this point, we're looking at, at least $3.6 billion. By today's market value, it's $4.1 billion that was seized from this criminal act.

JULIE HYMAN: And it's pretty amazing because I believe at the time, when the crypto was originally stolen, it was worth about $71 million if I'm not mistaken. So obviously, it's appreciated a lot here. And even though they're not directly accused of perpetrating the hack themselves, I believe that the Justice Department sort of hinted at it or didn't rule out the possibility that they were the ones who did this.

I mean, the information that has come out about this pair is pretty incredible. It didn't seem like they were living that extravagantly, right? They were still sort of out and about. Allegedly, she was participating in and wrote for various news outlets. She did a lecture about how to sort of insert yourself into various social situations where you weren't supposed to be.

He proposed to her using billboards in Times Square. I mean, you know-- oh, and she's a rapper. Oh, yeah, I forgot about the funnest part. She's a rapper who calls herself Razzlekhan if you want to hear some bad music. Sorry, you can go look it up, I guess.

DAVID HOLLERITH: Yeah, the crocodile Wall Street is what Razzlekhan has referred to herself as. But yeah, Julie, you're pointing out a good point. Unlike many people accused of crypto crimes, Heather Morgan has a very active social media presence. And, you know, we're only speculating at this point, but that's probably something that is connected her and made it easier for, you know, the DOJ to access the funds or somehow verify what was going on.

JULIE HYMAN: Yeah, that is a good point. A lot of those social media accounts have now been scrubbed or shut or blocked, but there's still evidence to be found of the various rap videos. David, I shouldn't joke. It was a lot of money, obviously, allegedly, that these folks had. David Hollerith, thank you so much for keeping track of this story for us.