Bitcoin (BTC) exemplifies cryptocurrency’s dual-edged role in modern finance, pseudonymous transactions enabling peer-to-peer transfers that fuel money laundering via darknet markets, ransomware payments, and hacks, as seen in high-profile U.S., Japanese, and global cases like Bitfinex ($4.5B laundered), Coincheck ($530M), and Samourai Wallet ($200M+). Despite stringent regulations—FinCEN/IRS in the U.S., FSA’s Payment Services Act in Japan, and FATF guidelines worldwide—BTC’s blockchain anonymity persists, allowing techniques like mixers, chain-hopping, and micro-transfers to obscure illicit flows from ransomware groups (DarkSide/LockBit) and state actors (Lazarus), with Chainalysis tracing billions in criminal proceeds. These cases underscore AML enforcement gaps, prompting seizures ($3.6B+ U.S.), VASP compliance mandates, and mixer bans, yet BTC’s dominance in 99% of ransomware payments signals ongoing regulatory battles across jurisdictions.​
In May 2016, hackers exploited a multi-signature wallet vulnerability at Bitfinex, a major U.S.-based cryptocurrency exchange, stealing 119,754 BTC initially valued at $72 million but peaking at over $4.5 billion amid market surges. The perpetrators, identified as Ilya Lichtenstein and Heather Morgan (infamously dubbed “Razzlekhan” for her rap persona), laundered the proceeds through an intricate web exceeding 25,000 transactions. Techniques included Bitcoin Fog and other mixers to tumble funds, chain-hopping to privacy coins, creation of false identity accounts on various exchanges, and OTC desk conversions to fiat for luxury purchases like high-end handbags and real estate. U.S. authorities, leveraging blockchain analytics from Chainalysis and IRS Criminal Investigation, obtained a warrant revealing the private keys on Lichtenstein’s cloud storage in 2022, leading to arrests in New York. The DOJ seized $3.6 billion in BTC—the largest financial forfeiture in history—while Lichtenstein pleaded guilty to money laundering in 2023 and received a five-year sentence in 2024; Morgan admitted to fraud. This case illuminated Bitcoin’s pseudonymous vulnerabilities in U.S. illicit finance, directly linking to ransomware ecosystems and prompting FinCEN’s 2023 mixer prohibitions under BSA rules, though peer-to-peer gaps persist.
