US Government Crypto Wallet Hacked, $20 Million Stolen

• Hackers stole $20M from a US government-linked crypto wallet tied to the 2016 Bitfinex hack.
• Affected wallet held assets exceeding $14B, including USDC, USDT, aUSDC, and Ethereum.
• Stolen funds were laundered through a network suspected of money laundering services.

In a recent cybersecurity breach, a cryptocurrency wallet connected to the U.S. government was compromised, leading to a $20 million loss. Blockchain analytics firm Arkham Intelligence reported that the affected wallet, associated with the 2016 Bitfinex hack, contained funds seized by law enforcement, now lost to hackers who have begun converting assets into Ethereum (ETH) through a suspected money-laundering network.

$20 Million Drained from U.S. Government-Controlled Wallet

On October 24, Arkham Intelligence revealed that a U.S. government-linked crypto address, holding seized assets from various sources, was compromised. The breach allowed the attackers to drain approximately $20 million in multiple digital assets, including USD Coin (USDC), Tether (USDT), and Ethereum.

The wallet, identified as 0xc9E6E51C7dA9FF1198fdC5b3369EfeDA9b19C34c, previously received funds from nine different U.S. government seizure accounts linked to the 2016 Bitfinex hack, including one address specified in court documents as 0xE2F699AB099e97Db1CF0b13993c31C7ee42FB2ac.

Arkham’s initial findings indicate that after gaining control, the hackers moved funds to their wallet, 0x348…A9f, where they converted the stolen assets to Ethereum. Arkham further noted that these transactions likely connect to a money-laundering service, and the attacker appears intent on concealing the trail of illicit transactions.

Stolen Cryptocurrency Assets and Transfer Details

The hacker transferred $13.70 million in AUSDC, a version of USD Coin, and $5.45 million in USDC. Another $1.125 million in USDT was stolen, along with 177.892 ETH, valued at approximately $446,920 at the time of transfer. The crypto assets are currently being laundered, with the final destination remaining uncertain.

The U.S. government has remained quiet, but analysts predict a possible investigation is underway. Considering the wallet’s holdings, estimated to be more than $14.23 billion, the breach raises concerns about the safety of state-controlled digital assets and other cryptocurrencies confiscated in high-profile criminal cases such as the Bitfinex case.

Background on Bitfinex Hack and Legal Proceedings

This is connected to the September 2016 Bitfinex hack, one of the largest cryptocurrency robberies in which 120,000 BTC was stolen, valued at approximately $8.2 billion at today’s rates. Law enforcement agencies then confiscated the stolen digital assets in the largest digital asset seizure led by the DoJ. Ilya Lichtenstein and Heather Morgan, the couple connected to the hack, were arrested in early 2022 and later admitted to laundering the funds.

Under a plea agreement, Lichtenstein will face a five-year sentence, and Morgan might get just 18 months since she helped investigators. Their sentencing is set for November 2024, with prosecutors considering Lichtenstein, the primary orchestrator of the hack.