An Exploration of the Money Laundering Associated with the Bitfinex Bitcoin Hack

Abstract

Bitcoin, launched in 2009, has gone through inconspicuous years, halcyon years, and now, the chaos years. Writers predicted that bitcoin would replace fiat currencies and the underlying technology, blockchain, would significantly reduce the need for auditors. However, there have been numerous major cryptocurrency crimes and related bankruptcies. Called the “heist of the century,” in the 2016 Bitfinex hack, 119,754 bitcoins were illegally transferred from over 2,000 Bitfinex accounts to an external wallet. Starting in January 2017, about 25,118 of those bitcoins were transferred to other exchanges. Several money laundering techniques were employed; however, the perpetrators made mistakes and were arrested in 2022. They were identified through analyzing the bitcoin blockchain, geolocating the IP addresses used for communications, and identifying individuals when bitcoin was used for “real world” transactions. The bitcoin blockchain is publicly available and would be a great resource for Big Data, data analytics, and forensics classes. JEL Classifications: K42.