I was joined by Lawrence Lewitinn, the Managing Director at Coindesk to talk about the recent news about the Bitcoin Bitfinex hack.
What happened to the 2016 Bitcoin Bitfinex Hack? Who actually hacked the exchange?
In recent news, it seems like Ilya Lichtenstein and his wife, Heather Morgan were accused of the hack? Did they do it? What do we know, and what do we not know?
In this episode, I called up, Lawrence Lewitinn, the Managing Director at Coindesk, and ask him about the story. Did they actually do it? How did the hack happen? Who else did we suspect?
Also, what would you do, if you have stolen 4 billion dollars?
Are we all safe from hackers? Is it safe to leave our crypto on any changes?
To quote Lawrence, not your key, not your bitcoin!
My new book Skip The Line is out! Make sure you get a copy wherever you get your new book!
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Unknown Speaker 0:01
This isn't your average business podcast, and he's not your average host. This is the James Altucher show.
James Altucher 0:14
I was really fascinated by the news released yesterday, I guess in 2016, there was a hack of an exchange BitFenix where somebody stole at that time, about $70 million worth of crypto was the largest hack at the time. I think it's one of the largest hacks and financial or the largest crimes in financial history of stealing from an exchange. And that now that same those same coins are worth about $4.5 billion. Yesterday, they caught a couple involved. Ilya Lichtenstein and Heather Morgan. The whole case is fascinating for a variety of reasons. And I have on with me, Lawrence, and Lawrence and I have I our paths have intersected at various points we both were worked with the street COMM The New York Observer Yahoo, CNBC, now you're at, you're at Coin, or you're at Coin desk right now,
Lawrence Lewitinn 1:07
my coin is now yeah. And so
James Altucher 1:09
you were reporting on this? And I'm just I just wanted to chat about this case. What's so interesting about it? And first off, why don't you summarize, like what you've covered so far?
Lawrence Lewitinn 1:17
Okay. Well, you know, the first thing to say is, all of this is alleged by by defense, right? So this is not an innocent till proven guilty. And we actually don't know the full details. And that is even clearer when you read the complaint that was filed. So yeah, so as you were saying in 2016, an exchange called bit FinEx, which was one, it has an interesting place in the role of crypto in that BitFenix. And its sister company tether, are we well, specifically tether is in Oh, I didn't know tether was a sister company as a company of BitFenix. Many years, they denied any relationship. But I think it was after the Panama Papers came out, it turned out look at that everyone's all the names seem to match up and managing it. And later on, in a couple of years ago, when the New York Attorney General said, you know, that's a whole different story we can get into about the lawsuit from the New York Attorney General and how basically BitFenix covered up an even bigger loss that they had on their part in dollar terms, right, because this, this thing that happened in 2016, was about $70 million. What happened in 2019 2020? You know, this was more along the lines of, you know, it was several 100 million. So it there's a
James Altucher 2:46
no although was it more Bitcoins Because don't forget, in 2016, when this hack happened, or when this crime happened, Bitcoin was only at $600 per coin, then went all the way up to $70,000. So in 2019 2020, maybe was at $20,000, something like that, or $10.
Lawrence Lewitinn 3:03
I think at the time this happened, it was much less. But this was a this is a completely different story, it's going to require several hours to discuss. And it's, you know, coin desk right now is in the midst of, you know, we filed a Freedom of Information Law request to get some of the information that subsequently in part of the settlement. So big bid for next slide iphonex, right, there's a parent company did a settlement with the New York Attorney General and part of the settlement was that tether was going to release what it's what its quarterly assets are in assets and their assets are attestations. Some of that information, supposedly is more details that were submitted to the Attorney General then is being released to the public. And there's always been some questions as to what exactly is on those is on their asset side and for people who are watching it listening and watching and they're like, What are you talking about? tether is a it's a stable coin. So the way a stable coin works, it's almost like casino chip poker chip right? casino chips you put in $1 you get a chip and it helps because you can't move dollars in the blockchain you need a stable coin.
James Altucher 4:27
Why you need a coin that acts like the dollar and the verge into dollars. Yeah, right. So there's so if I want to get rid of Bitcoin, for instance, and turn it into dollars, first I turn it into something like tether and then I convert the tether into dollars, right?
Lawrence Lewitinn 4:41
That's if you want to use a blockchain method of exchange, centralized when you go put your money with Coinbase you're actually investing in their you're basically trading off of their wallet and this matters into the story of what we're going to talk about with it tonight. So you have this you basically are Trading, if you're using a centralized exchange, you're not actually on the blockchain necessarily. You're buying and selling through this centralized exchange, they're keeping their own accounts, they're keeping track of it. But there's an old saying in crypto not your keys, not your Bitcoin. And that is incredibly important part of what this whole story is about. So in the story with BitFenix, slash tether. In later years, they had a fairly, it's kind of a long convoluted story involving a payments processor who may have taken a lot of their money, and then opening accounts that, you know, are people opening accounts to process their their dollars, and not necessarily not necessarily being truthful with why they were opening those accounts with the banks. And that's, of course, a big problem. It's a big no, no. So they ultimately settled with the Attorney General of New York Letitia James. Rewind a few years, though, in 2016, BitFenix, is hacked and attacked the tune of 120,000, a little under 120,000 Bitcoin. Apparently, it was done in a series of about 2000 transactions. And it's always been this giant cloud slash mystery in crypto, who did this hack and you know, there were conspiracy theories.
James Altucher 6:28
It was big news, then like this was before Bitcoin had gone like totally crazy in 2017 2018, that that amount of bitcoin was 20% of the annual volume of all of Bitcoin traded, apparently, and Bitcoin fell 20% That day, when the news of that hack was released, that's it? Do we know customers who lost money? Or was it just BitFinex? That lost money? Well,
Lawrence Lewitinn 6:50
again, they socialized in many ways this loss, which because again, not your keys, not your Bitcoin. So they were able to socialize some of the losses in the sense that, well, everyone got a haircut. It was like about a third of their accounts got hair cuts here.
James Altucher 7:07
So like, why did they go out of business instantly? Like if I put money in a bank, and then I'm told 1/3 of my money is gone, I would switch banks?
Lawrence Lewitinn 7:15
Well, a lot of people, you know, again, you need an exchange to trade. Right? You need a place to go, not everyone, not everyone, it sounds so easy to just pick up and go. I mean, he there all sorts of theories as to why people stayed with on bit FinEx. Nonetheless, they did bit FinEx issued tokens to offset some of the losses for people which they ultimately repaid. And now they actually had because of this most recent thing that I was just talking to you about the New York Attorney General and their loss of several 100 million dollars, they issued another token, that's going to benefit actually, from the recovery, ultimately, should those coins end up back to BitFenix. And, and it's not quite sure how long that process is going to be. Nobody really knows what the next steps are, and then how they're going to allocate the those coins. But there is a token out there called una suddenly, or it's all just called Leo, it's an exchange token. And it's going to benefit ultimately, the token holders are going to benefit from that recovered. Okay, Bitcoin so so actually, what was interesting, and before we get into the details of this hack, the several days several days ago, this was around January 31, February 1 or so. There was some movement in this 100 and so okay, not all 120,000 Bitcoin were together, right? But they knew that a good chunk of them so about this was about 90,000 Bitcoin, right? So you'll see this discrepancy about $3.8 billion in the amount recovered, but $4.8 billion worth right. So if you take the price 20,000 is like a good billion dollar gap. So what has been recovered? Or what's been accessed was this $3.8 billion worth on net 90 something 1000 Bitcoin? Somebody noticed that there was a movement in it. And the question is, and hopefully I'm not too choppy here. The question is, who moved it? So the initial thought was, well, clearly it's the whoever the hackers were moving it, but it turned out some people on the internet were noticing, hey, you know, what, the way in which it moved, it kind of signal that it was a Athar of like the Feds doing it because it there was a small amount that was first transferred and then the big amount
James Altucher 9:51
all at once. And what does that indicate the feds will have it? I guess
Lawrence Lewitinn 9:55
it's a method in which the Fed see it when they seize big Coyne that's kind of some things that they would do, there are certain things that they would do and their behavior pattern would indicate that this was not not a potential hacker, but potentially a government doing it. And
James Altucher 10:13
also do we know as the place that they move to, to is like a government wallet, or
Lawrence Lewitinn 10:17
I don't remember exactly where it moved, to be honest, I don't remember where it moved. But I did know that people were commenting back then they're like, hey, you know, there's been some movement, it looks like it looks like the feds are up to something.
James Altucher 10:29
And they moved it from the wall, like so. So basically, when BitFenix was hacked, the 120,000 bitcoins removed into some wallet, you're saying? Yeah. But like, so how do people know to look at this one while and say, Hey, this was part of the hack. And now it's been moved, like so I'm trying to understand.
Lawrence Lewitinn 10:49
One of the misconceptions about Bitcoin is that it's private. It's not it's actually one of the most public ways to transact in the world, is that if you use the Bitcoin Blockchain, that transaction is recorded. And it's, it's immutable. I mean, it's there forever. Everyone can see it. You look it up, you can see, you know, years later, exactly. When that happened. There's nobody going back and pressing Delete in case you, you shouldn't have sent it, etc. It's done. That's there. It's on the blockchain. That's the glories of the blockchain. Is that all that information is there forever and ever? So this? So So these kinds of transactions, right? They know, oh, this, these coins moved? Initially, from that hack, they know when that when the hack occurred, where they moved, etc. And they were flagged, and that's it. And so it's really hard to do it. Nonetheless, the it appears that whoever hacked it, right? And now notice that I'm saying it appears who ever did it? Because we don't know. Right? The these are allegations against Lucian, insane. And Morgan, that they come in. These are allegations made by authorities that they laundered the money, but they didn't say they hacked it. If you read the complaint, they actually say a hacker.
James Altucher 12:14
Right. And although the implication they they said that this complaint is about the laundering of the money of the Bitcoin that was hacked, and they don't identify Lichtenstein and Morgan at all as the hacker. But I guess common sense is it looked inside and Morgan, were the only ones involved in all the laundering, and it really involves the entire amount of the money amount stolen. They probably were the hackers, but we don't know that's we don't it's not even alleged, we just don't know,
Lawrence Lewitinn 12:42
we don't know, we don't we honestly don't know. I don't I guess we can make a guess. Yeah. And you can try to make a guess. But legally, that doesn't stand number one. Number two is that we actually don't know. Because not all the details, maybe even the government doesn't quite know, the way the government is is is putting up these charges is that Liechtenstein and Morgan had a cloud account. And they had all the details of all of these accounts in there. And this is in the in the in the complaint that they they alleged that the LE Christina Morgan had all these files in it were all these accounts and that they had used email addresses in India to start accounts in different exchanges. And that KYC AML flags, you know, your customer anti money laundering rules, the flags went up for in certain cases, we don't know exactly. who tipped off the government that, hey, you should go look into this account. And we have
James Altucher 13:48
although although they since you, since they do know what wallet, the hacked money went into, they were able to trace that money going from that, you know, money from that wallet going into other wallets, and it owned by different exchanges. And then ask those exchanges, who those accounts owned. And in some cases, they came back with the names, Lichtenstein and Morgan and that kind of gave him the initial clues
Lawrence Lewitinn 14:14
that yeah, I and so we had we have that, but we don't know the exact we don't know the exact process. And the thing too, is that there, you know, there was a big bounty on whoever could could, you know, reveal who did this lead to arrests and convictions? Yeah, $400 million bounty? Yeah. Which is nothing to sneeze at. I mean, look, if, you know, if someone got drunk at a party and open their mouths for $400 million. I don't know, Mom, I'm gonna have to turn you in. But
James Altucher 14:44
I would say my mom, definitely.
Lawrence Lewitinn 14:47
I wanna I, yeah, that's between you and your therapist
James Altucher 14:50
going to jail? Yeah.
Lawrence Lewitinn 14:53
So if they hadn't, the Feds had a warrant, and they went through and they were able to commit Everything that way they say. So that that's sort of how this happened
James Altucher 15:05
and sorted throughout. But like, they, they got to Lichtenstein's cloud storage account. I don't know where it was, like, let's say it was Dropbox. And he had a spreadsheet there with the usernames and passwords of many of these accounts in question. So that was a big indicator that he was the owner of these accounts. Right. And some
Lawrence Lewitinn 15:23
of them had the word frozen, allegedly, on the lines, where those are so that so in the complaint, they said that, that he knew, they claim that he knew that they were frozen,
James Altucher 15:38
I have a question, since you can always track movements from one wallet to another, even though you don't know who owns the wallet up to a point up to a point. So what's that point? Like? How does someone actually get bitcoin out of this and escape?
Lawrence Lewitinn 15:50
So they were they were sending it out to different, you know, they're using different methods. And again, I'm not a technologist. So, you know, that's why I'm being really careful not to describe things in full because I don't first of all, I don't want to give people the wrong ideas about how this works. I would say, you know, seek professional assistance, so I'm trying to do this, but they essentially were figuring out a way to peel if you will, the little bits of Bitcoin and trying to describe it in very simple ways and obfuscate it through different movements and into different types of currency such as Manero. Manero is a more is really a real privacy coin, which Bitcoin isn't Mineiro makes it hard for people to train really hard to track I mean, this and I'm not saying this is a to to give an advertisement for Mineiro but when people do things that aren't necessarily she was a kosher in the markets they they use Mineiro as a way to do it more so than Bitcoin the reason you cure Bitcoin and all this is actually you know, a lot of the the online frauds and whatever it's like send me Bitcoin and and what have you to this wallet is actually a couple things. First of all, those hackers sometimes aren't sophisticated. But second of all, there's not as much liquidity in Manero as there isn't in Bitcoin. So it's easier to to ask for Bitcoin because it's easier to access, right? You just go and eat their vending machines, or literally, I went to a gas station yesterday. And I went into, you know, buy some candy as I should. But now I've confessed my wife's gonna yell at me for busting my diet. And as I'm going into by some, there's a guy next to me talking about NF Ts, and he's getting money he's getting he's getting Bitcoin investing in a in an ATM machines, right? Yeah. And in a in a gas station in New Jersey. So it's ubiquitous. So you hear all these things like, well, Bitcoin is the currency of scammers. No, really, you know, you when it comes down to is other there are other things.
James Altucher 18:09
So basically, what they were doing was they were taking some of their Bitcoin in that was in the hacked wallet that everybody saw was the hacked wallet, but they were moving it to various exchanges or decentralized allegedly, and and then maybe switching it to Manero before the Feds knew who they were what was happening. And then once it's in Mineiro, it disappears because you cannot track transact
Lawrence Lewitinn 18:35
Mineiro it's hard on the narrow Bitcoin. Yeah.
James Altucher 18:38
Mera has over $100 million with a trading volume a day, though. And this hack occurred, you know, in six, almost, you know, five or six years ago. So yeah, why didn't why didn't they? I still don't understand, like, Why
Lawrence Lewitinn 18:51
didn't cash out right away? Yeah.
James Altucher 18:53
Or at least over these past five years?
Lawrence Lewitinn 18:56
We don't know. I mean, again, the way we don't know if it was them, who did it? And who exactly did it the same way? I mean, you know, there was an arrest a few years ago, of two Israeli brothers on this very hack and the lead story. Yeah. And the story was like, it didn't hold water. We never heard about it again. I don't even know if it went to trial or not. And it was just sort of like, it didn't make sense. Who knows what what it was somehow connected. And, you know, the Israelis arrested them, but Oh, no, like, you just don't know the full details again. Even the Feds admitted a hacker they didn't say he is the hacker she is the hacker they didn't say that in their complaint.
James Altucher 19:41
About like, whoever, whoever the hacker is, like, Let's even say it's not them. I'm just talking like, hypothetically, how would you get rid of how would you cash out on this hack? Like they, again, let so so they would move it into Mineiro or they would move it into other currencies? They would do? Small transactions, split it up all over the place. So why don't they? Why the other day? Did people notice that there was moving from this wall? Hasn't there always been moving from this wall into all the exchanges and walls.
Lawrence Lewitinn 20:09
So there was that there was so far of that 100 and 20 million, as I said, 90 million was kind of staying put. And it was 30. Sorry, 90,000, right out of 120,000 90,000 stayed put, and there was 30,000, that did all that movement. So, you know, you could have had conceivably a situation like Superman, you know, where you are actually office space. You ever see office space where yeah, they accidentally get it, you know, so it's like the same thing, it's like you make it you had a an accident, and you're hoping to steal just a little bit, and you ended up stealing a lot. And you could have that situation here, we don't know, for certain we just don't, we don't know. And this is still being debated right now, between the custodian, big guy from at the time and bid FinEx, his former employees, saying, hey, you know, the custodian, had this multi signature wallet, and you had to have two or three signatures, you know, digital signatures to approve any kind of transfers out of the exchange. And there was a question of whether or not they just automated that which essentially gated the whole thing, but that they automated that to make it easier to use, and that this was all put in place. And this is kind of an argument that they've been having back and forth. And other people have been chiming in. With this idea that this was maybe had been put in place because it was coming at a time when BitFenix was trying to operate in the United States, they had to put in place some KYC AML Rules, but they were not fans of it. So they made it. Yes, they put in these checks. But the checks may have been easy to overcome by design, and that whoever hacked it took advantage of that.
James Altucher 22:05
Okay, so I'll get to that in a second. So wherever this while it was being stored where they transferred the hacked money that was being hosted by somebody or no,
Lawrence Lewitinn 22:15
no. So you're talking about the Bitfenix? Is wallets and what have you. Yeah, I mean, that was that was they had a custodian for all their, their stuff, right. So then those coins moved into a different wallet, outside of the control a bit FinEx and their custodian, and ultimately went wherever it went, you know, say, you know, a couple of 1000 accounts.
James Altucher 22:36
That wallet can't be frozen or seized, because a there's well now tog Rafi aspects. Yeah, no,
Lawrence Lewitinn 22:41
that's the one that ultimately was drained by the Feds the other day.
James Altucher 22:46
Right? Because they got they figured out how to decrypt it, you know, maybe based on what was in the cloud storage of Ilya Lichtenstein perhaps, but so So, again, it's confusing to me. Like we don't know, we don't know who hacked but do we know how it got hacked? We do know how bit FinEx got
Lawrence Lewitinn 23:03
hacked, you know?
James Altucher 23:08
Did Ilya Lichtenstein ever work at biffen? X? I couldn't find it.
Lawrence Lewitinn 23:11
I don't know. I don't know if he was a consultant. He was somebody who was computer literate. And his wife, you know, and they got married in November, before they were on long term relationship. And I think there's some interesting legal aspects as to now that they're married, who can testify against whom, etc. But the And so that happened, like four months ago, whether or not they were alerted to something we don't know.
James Altucher 23:38
Um, oh, they just got married this past November. Yeah. And so, so Okay. So we don't know this, this bit. The next know how they were hacked, or they haven't said or, like, I don't, I don't know. I don't know, like someone had access to their that the security keys have these bit for next,
Lawrence Lewitinn 23:56
somebody had a way in which they could do it in which the custodian said there was nothing noticeable. And that actually led to a lot of the conspiracy theories. It was an inside job was a conspiracy theory.
James Altucher 24:08
It kind of had to be an inside job, because how else would they get keys? Yeah, we don't know. I don't know.
Lawrence Lewitinn 24:12
We don't know. They kind of like, like, we don't have somebody left a wallet somewhere. And we just don't know, we don't know if somebody left their code somewhere. Somebody left the we just don't know that. That point. All we do know, is what the Feds allege after the fact of the hack. Right. So a big mystery before. Well, it's interesting is, though, that the custodian, I think it was a chief. I'm trying to remember what the role was but did a an interview with Heather Morgan, for an article at Forbes on cybersecurity.
James Altucher 24:53
So that might be one of her ways of trying to dig for information of how much they know.
Lawrence Lewitinn 24:58
I don't know I honestly don't No, I mean, I don't know how or why it was just an interesting tidbit. That yeah, that's a that's an interesting possibility. Assuming that she knew something or she was involved again, I, we don't know if they, you know, until until there's a trial we and conviction, we can't say whether or not that happened.
James Altucher 25:20
So, so whoever, so assuming it was them, but or, or assuming was anybody, they filtered out 30,000 of the 120,000 bitcoins through, they transferred it to, you know, exchanges that were on the dark web that this AlphaBay exchange, they had fake email accounts and companies and exchanges in India, they transferred things to Well, today, we're able to siphon off like, a billion dollars worth, why were they writing for Forbes and Inc and hanging out in New York or California or wherever? Why don't they just disappear? Like Did Did they ever get a hold of a billion dollars?
Lawrence Lewitinn 25:59
Look, I'm sitting here, and I'm scratching my head on that one, too, right? Like, who's the last person you would expect to do it? If someone in your right in your face every day? Yeah, like, but like, yeah, we're all hesitant to say, they were these criminal masterminds. And not only because legally, that we can't say it, right, because we don't know, the full details of how it happened. It's still alleged, it's still an allegation. And it's it hasn't gone to trial. But it's really hard, emotionally to even say it, because you're looking at near like, these weren't, they were having, like a fantastic life. Just a fantastic, you know, very normal life.
James Altucher 26:51
But like you said, though, they got married in November, because perhaps we don't know, but perhaps they thought, perhaps they thought that the government was looking after them. Yeah. Even then. I don't know. It just seems like really? Like, what would what would you have done? If you?
Lawrence Lewitinn 27:07
I don't think I would have done much different if I if I had that. Maybe I don't have that mentality? I mean, I probably I probably just go biking all day.
James Altucher 27:15
But you want to like say, Okay, I'm gonna hide in South America somewhere
Lawrence Lewitinn 27:20
where life is that? Like, you know, people live
James Altucher 27:23
better than going to jail.
Lawrence Lewitinn 27:25
I, but that's a risk you take if you think that you're going to get caught. Yeah. I mean, if you think you're going to get caught, or you could get caught, one thing you wouldn't do is put stuff on the cloud computer after writing articles that you shouldn't put things on cloud on the cloud. I mean, there's, there's so many things here where you're just scratching your head, you're like, This doesn't make sense. And if you feel like you're not getting the full story, anyway.
James Altucher 27:53
Yeah, cuz I think I mean, one thing that they apparently bought was a $500. Walmart gift card. Yeah, with some of the so like, it doesn't seem like they were
Lawrence Lewitinn 28:02
hotel stays. And it was kind of it sweetly modest for what you would do with a billion dollars and in Bitcoin. I mean, it's like, you almost feel like you know, like, God forbid, they are, like, God forbid, they actually did it. But you you you go you know, like they weren't, you see these people and you know, like, let's think about this for a second. They know they're not going to Central America and telling people to invest their money in Bitcoin, you know, they they're not going there and pushing the Bitcoin gospel on people who are living hand to mouth they're not going out and pushing it on people you know, and you know, making them the bag holders and selling them all those Bitcoin that you know, however, they got it, they didn't do that. But like they're doing this legally and never did anything illegal. But the question is, how much moral is it? How much more moral is how much more moral is it telling people to to end countries to put their money in a volatile asset at a time when they're they're at risk compared to putting up a couple of rap videos and and and small finger Walmart cards and maybe going on a big I don't know what's more damaging to society you tell me
James Altucher 29:31
Well, I mean, I'm I'm in favor of Bitcoin as a currency currency like El Salvador switched from their failing currency to Bitcoin was probably a good decision for the country as a whole.
Lawrence Lewitinn 29:42
You call it the dollar. The dollar is a failing currency. But they're in a situation now where you know they have to pay their debts and US dollar
James Altucher 29:51
bitcoins were stable, then then let's say a failing I don't know what else Salvador's currency was.
Lawrence Lewitinn 29:57
Saboteurs currency was us is the US dollar. It's been the US dollar for almost two decades now used to be the Cologne, they got rid of it because it was failing. So they went to the US dollar and that was a stable currency for them. They switched recently to having both the US dollar and Bitcoin because they have a lot of remittances. The idea is that would cause on remittances, it would help diversify their asset base, etc, and attract investors to come into El Salvador to do mining etc, etc, etc. But again, it's, uh, you know, they and, and President Kelley, you know, likes to brag about how he buys Bitcoin, you know, he said, he bought it naked, etc, literally physically naked, not naked, and he didn't buy without puts. I mean, he bought it. You know, as as a former currency trader, when someone says, I bought it naked, you're thinking, Oh, he didn't? He didn't buy puts? No, no, he literally means he was not wearing clothes, or he's standing in his bathrobe or whatever it was, let's help buying Bitcoin on his phone. And, you know, I look I again, you know, obviously, I cover cryptocurrencies there. I'm a, I'm a fan animal, and a lot of ways and at the same time, I also think that we, we all have to be a little more cautious about what we encourage the financial revolution, and who we encourage the people to take up proverbial arms in the financial revolution. Because not every, not every person can afford to do it.
James Altucher 31:37
And I agree with you on Bitcoin, where it's still unclear whether this was a good test case, or whether or whether it's a currency or what if it as a utility, as theory, and we're starting to see there's actual real world utility because there's hundreds of millions of dollars in transactions per day. And d phi is a real thing. And NF T's could be a real thing we'll see. But yeah, Bitcoin, we don't know. But like you said, it's not like they were, you know, they weren't even really so what they were.
Lawrence Lewitinn 32:06
They weren't buying, you know, they weren't being flashy with their money. So
James Altucher 32:10
this could suggest maybe they weren't the hacker, maybe they the hacker was paying them to somehow launder part of it. For all we know,
Lawrence Lewitinn 32:17
yet. We don't know. We don't know. We don't know. Until there's a trial, we need a trial.
James Altucher 32:24
We know they did move some of the they did move some of the Bitcoin into some exchange called AlphaBay, which is apparently was an exchange working off, right?
Lawrence Lewitinn 32:34
That all that that that stuff got cleaned, if you will, laundered and what have you,
James Altucher 32:39
what was AlphaBay? Like, and why did it shut down?
Lawrence Lewitinn 32:42
I mean, I'm not too familiar with AlphaBay. It's, I like the up and up and honest exchanges myself. So that's, you know, if there's no KYC AML, I don't know if I necessarily want to know what that but
James Altucher 32:55
no, but like if they're connecting to AlphaBay. Already, that means they that means they knew how to navigate the so called dark web and find other participants engaged in illegal activity or some semi illegal activity, or whatever it was. And my other question there is, why do all of this at all? Why not just find a really big illegal player and sell for a massive discount? The coins you have? So for? Let's say they stole $70 million worth of coins now worth four and a half billion? Why couldn't they just say to somebody on the dark web? Hey, we've got this wallet was $70 million with a Bitcoin? We'll sell it to you for 10 million? And I don't know the answer is I don't know. But I'm just curious. Like, what like, what they did was stupid. For all
Lawrence Lewitinn 33:40
we know, that the hacker again, I'm not gonna say is it's I can't I won't say Morgan election thing for a lot of reasons. But the hacker may not have had the same kind of phonebook that James Altucher would have.
James Altucher 33:56
I don't have a full book of illegal
Lawrence Lewitinn 33:59
people have $70 million to buy Bitcoin or, or, you know, a couple of billion even, they might not have that those kinds of connections and they might not know necessarily like, how do you like, it's scary in many ways. Imagine. I mean, like, you know, it's like something like you come across, I don't know an inheritance or something or a lot like you see this with lottery winners, where like they they get all of a sudden this massive windfall. And there are many ways you can do it. You could spend it ridiculously and a lot of lottery winners go bankrupt. You see this a lot with sports with with athletes, a lot of athletes get these massive pro contracts. Five years after they're done with their leagues. They're bankrupt. There's a huge amount of bankruptcies going on with professional athletes. And you see this also too with lottery winners. Their lives get ruined you So getting back to your answer, why not spend, you know, why were they spending it so frugally? But you say, Well, I mean, what else would you do? Like what was what would have been the smartest way to do it?
James Altucher 35:26
Okay, the smartest way to do it, here's what I think is if they were the hackers and I'm putting a big F, and they they had it in a wallet that was everybody saw it in the wallet, but you can't unlock the wallet for, for the reasons Bitcoin, part of the reasons Bitcoin exists, you can't unlock someone's wallet, it's it's too difficult. And they could have any hacks, they seem to have connections into the dark web, and illegal ways to get rid of they understood money laundering, at least according to the complaint. They allegedly understood money laundering and all the different techniques, and they were using those techniques. And they did those techniques. And so they got, they cleaned something like a billion dollars, according to the complaint. So I think the way I would have looked at it was a it's one thing to do the hack, it's another thing to clean the money. So find someone in the dark web or some Sheikh in the Middle East was willing to take this risk, and just sell just say, Hey, we got $100 million for this, we'll sell it for 20 million, we'll sell for 30 million, just get it off our hands, wire the money to this numbered Swiss bank account. And, and then and then they would disappear if the hacker would, you know, not show up in the US ever again, move to some, you know, take it on new and identity which you could pay for, and and move to some weird country and live out your life.
Lawrence Lewitinn 36:52
That might be what you would do. But humans are incredibly Yeah. But people are incredibly social. They have you know, you're talking about getting rid of your identity, losing your family pretending to be dead. And there are people who do that. Right. It's always been the question of rodrygo, folks, right? The founder of quadriga whether or not he really Is he really dead? That you know, that's always been a rumor. But there are other people who you know, you have a social life you have family, you don't bail, you know who so they had to put up a bond it was the parents put up a bond. I mean, I'm not saying again, they were guilty so so this is you know that they were responsible for the hack. But nonetheless, I mean, if you think if somebody is in that if they were the hacker etc. They clear their family loves it. Yeah, their friends loved them.
James Altucher 37:55
It was a $5 million bond for Alia and a $3 million bond for Heather. And also part of the requirements, were they they had to give up their phones and computers, and they could only use a flip phone that has no internet access. Yeah, cuz then the parents had to put up their homes.
Lawrence Lewitinn 38:09
Yeah, they found a bag. burner phones.
James Altucher 38:14
Yeah. illegal activity. No, we don't know. We don't know. Okay, because there's no trial. We don't know. You don't know.
Lawrence Lewitinn 38:21
I'm saying we don't know. But even so, I mean, like, I have got a you know, I have friends who have burner phones, but that's all because they're cheating on their spouses. But I've never even
James Altucher 38:31
seen a burner phone like, is that a phone? That literally is a flip phone that works for a day or something? Yes,
Lawrence Lewitinn 38:36
I guess maybe. Maybe that's jitterbugs market? I don't know. You know, like for the CEO. I don't know. I have no idea. Yeah, but like, hey, get a jitterbug. You know, for the, for the boomers. You know, smartphones, you know that smartphones are kind of scary. So they get the big, you know, the big numbers is like Hello, grandpa. Yeah. So maybe that's kind of fun thing. I don't know. But I'm saying like people are social they did. These are people who have family that loved him. She had you know, I? A lot of us watch their her videos last night. They were fantastic. I loved. I really? I was Oh, God. I was on the floor. That is genius. They're wrapping videos. Yeah, but yeah, you know, the thing is that I think people were misinterpreting what was going on there. It reminded me a lot. There's a performance artist named peaches a couple of decades ago and Katie was another rapper. And they're absolutely hysterical. It's it's comedy. It's rapping and and, you know, she she's completely self aware. Doesn't take it seriously. And you know, Jeremy Allaire, and the circle crew did a rap video as well, that looked like they were not aware of what they were doing. And it was embarrassing. what she was doing was pure. comedy. My wife and I just sat there, we went through as many videos as we can, unfortunately, they were able to take them down today. But I bought her whole catalogue on iTunes, it was fantastic. It's really It's funny. It's a lot of social criticism. You know, she she had one line in, in a song called excuse me, SAS sa s hold, which is about people in the SAS industry service as a software as a service. And she said, you know, how can 30,000 hacking 30,000 people be in 30? Under 30? You know, like, That is funny. It is it's absolutely funny. And she took a real like, you know, she, she really nailed a lot of the, the tech culture in a very biting, biting way. And a lot, you know, feminism and all that stuff. And it's sort of like, I think people are watching this and yeah, you know, she's very cheeky and everything. But you know, she was, I look at it as like she was it was performance art, and I think she did a great job. But that's something that you can't do undercover you can't do in hiding you can do on an island by yourself. It is part of being in a social group and got you know, not living in Manhattan living in Brooklyn, living in Bushwick. Where there's art, there's culture, the things happening, interesting people doing new things, and she was fine. She had a day job or a regular day job, he had a regular day job. And they were living in many ways. You know, we think like, what would you do with billions of dollars if you had it in your head? And the answer is they might maybe they answered that question for us, which is, enjoy your life.
James Altucher 41:48
Or maybe maybe though, to your other point that maybe there's more to this story. Because yeah, why live in Bushwick? Why not? Were they overconfident that they were never going to get caught? Where they just said to me, something doesn't quite add up.
Lawrence Lewitinn 42:02
If they were guilty. Again, this raises so many questions. But on the outset, on the outside chance, they are responsible or whatever, I'm going to say that right. They live a in many ways, a kind of life that many of us are familiar with, and are comfortable with and enjoy. I mean, you know, you think about like Warren Buffett living in Omaha instead of on the coasts, living in a normal neighborhood, instead of like, you know, the biggest house is obnoxious, Li big, big McMansion, you live in a normal house, relatively speaking, for one of the richest men in the world. There's something comforting and reassuring about having a normal life. And
James Altucher 42:52
saying, like, like Warren Buffett, obviously, he's not afraid of being caught for any illegal activity, they must have always had. I mean, they knew they were, you know, allegedly, they knew they were engaging in illegal activity. And so that that puts a certain fear probably into them. And I would just think they would have taken more precautions lifestyle wise, like you said, even though they were living a simple life, they weren't spending a lot of money. I don't know, I think I would have probably tried to keep a lower profile or, like I said, disappear or it just but but to put it makes so little sense to me what they did that it's to your point that maybe there's something there's more to this case, though, that will be uncovered that we don't really know. And I guess the next step is the trial. But it's worthwhile reading the complaint because it does show. The complaint itself is almost like a guide to money laundering. Bitcoin, because it does show like all the different ways in which they, they, the Feds named all the methods that they were using for money laundering. And the guy who wrote The complaint was saying, in my experience, blah, blah, blah, this is how money launderers do it. And it's just, the whole thing is so odd. And we don't know any connection that they have to BitFenix but but yet, somehow they gained access to a very secure wallet within BitFenix. And it seems like they got or, allegedly they got this access, and nobody else as far as we know. But But again, the Feds did not say that they're not, you know,
Lawrence Lewitinn 44:23
the they're not too big. If they know something that they you know, they know something, I don't know, something, it there was no definitive answers on either either side of it. So, you know, maybe maybe they're gonna get more information from them. Or maybe they'll we don't know, we don't know, you know,
James Altucher 44:42
do you know what happens to the money now? Does it go back to BitFenix? Or that
Lawrence Lewitinn 44:47
to be seen? I mean, I You would think that it Yeah, at some point, it would go back to BitFenix. How and when and why, you know, et cetera, that that hasn't been spelled out yet. And what kind of timeframe we're looking at, for it to go back. If they weren't expecting it. In recent weeks or months, this was definitely a gift for them to get it back, finally. But this was yeah, it's Yeah, I don't know exactly the timeframe. And I don't know if it's been spelled out yet, or how what the next steps are,
James Altucher 45:20
if you could ask them one question, what would you ask them?
Lawrence Lewitinn 45:23
It's the next. No, if
James Altucher 45:25
you could ask, Yulia Lichtenstein and Heather Morgan.
Lawrence Lewitinn 45:28
When's, when's her next album dropping? It really is good. I know. I don't know. I mean, like, I guess I you know, it's like, I think the question is, you know, who did it? And how it you know, what ties? Were there any? Was it an inside job? Or, you know, what, what were the? What were the holes? And again, I don't know if they would necessarily have the answers, because we don't know what their involvement was. And this is, we don't know the full extent, we don't know what they knew. And that's going to come out and trial
James Altucher 46:05
is such an interesting situation. I'm sure we'll be following. And Lawrence, I'm sure you'll be following. And hopefully, we could do an update at some point.
Lawrence Lewitinn 46:12
But yeah, I do think that the key to it on is all of this is that, you know, I think a lot of people watching this from the assumption that they were involved in it, and did it, a lot of what you were saying is like, why didn't they do this? Why didn't you do that? And I think this in many, for many people, it's idea that the, these are people that were just like them, you know, like, I could see myself maybe I'm not as I'm not a talented coder, like Yulia. But I could see being friends with them and seeing them around that could be like, you know, or her around at a show or cafe or restaurant, I
James Altucher 46:50
they're a part of like, the tech community,
Lawrence Lewitinn 46:52
part of the tech community, but not like, you know, look, we all know, these these entrepreneurs who are at the top of their game, you know, the founders that every, you know, they're like, Star founders, and we, you, you know, them, I know them, we've known them, as we, you know, he said, our careers and our lives have have have crossed paths, many, many decades. And we know these kinds of like stars. And then you have people who are just kind of like kind of working their way up through this through the ranks, if you will, socially. But they're having like, an okay life, you know, they live in a nice house, they live in a nice apartment, they, you know, not not the biggest apartment, not the smallest, they have a little elbow space. But they have normal lives, right? They're not jet setting and going to like, you know, fancy places all the time and whatever. And like buying an island and buying a sports team and buying this and buying that. I mean, we you know, you see these, you know, people have billions of dollars buying sports teams, right, buying you having stadiums named after their companies.
James Altucher 48:02
But I agree that would have been too. too noticeable. But I'm more curious, why didn't they just
Lawrence Lewitinn 48:12
our fascination, our fascination is there's a lot of wise, there's a lot of wise, but it's also that, like, you just he looked at your friends and neighbors, you're like, could they be? Like, could this person be? Like, behind? Yeah, the biggest crimes of the century, that, uh, you know, financial crimes of the century, you know, they're, obviously war crimes are real crimes. But like these sort of, like white collar crimes that we see. And, you know, they live such a mundane, relatively mundane existence, day to day, you know, getting up answering emails, dealing with meetings, and, you know, the kind of stuff that we hate, or we say we hate. But the question is, if we had all this money, would we necessarily even give it up? I don't know. And I think that that's a that's a great question. This raises to all of us, you know, how, how much of this Lifestyles of the Rich and Famous that were brought up on how much is that really fulfilling compared to the, you know, the human interactions, and, you know, having a purpose, a daily purpose of going to something and, and trying to build something with your bare hands and your wit,
James Altucher 49:25
even at the risk of most people don't have the risk of going to jail by living their normal life
Lawrence Lewitinn 49:30
that's worth the risk. I like like, we don't, you know, like, emotionally, we just don't know, we don't know, because most of us are never going to be in that position. Most people are never going to be in a position of having $10 million, let alone, you know, 4 billion or 3 billion or whatever,
James Altucher 49:47
but to the ill gotten gains. Yeah, or a
Lawrence Lewitinn 49:51
lot or whatever it is like yeah, most people aren't going to be in that position to really say, Oh, if I were this if I were that I would do this and that We don't know. But here they chose, you know if this is all true, if this is all true, they chose a path that is incredibly familiar and mundane to all of us. And we're sitting here asking why. And maybe we should be saying, you know, maybe we should look at our own situation. So, you know, we don't have it so bad. We are all billionaires in our own way.
James Altucher 50:22
Yeah, I mean, the fact that they had this money, and they still couldn't take the appropriate measures to make sure that that preserve their freedom, they chose their their lifestyle over that. Maybe that is a lesson. But like you said, it's, you know, there's a lot we don't know. And to me, it suggests there's more to the story, which will be definitely be following like, it's an interesting, it's an interesting thing, because I definitely, you know, we probably like you said, we probably have many mutual connections with them. So I definitely friends with both of them. Yeah, I really, I'm sure I have quite a few as well. Well, Lawrence, thank you so much for helping me figure this out. And you really raised a really interesting point that there's probably a lot more to this than that. We don't know there definitely is. So let's keep in touch over this. And thanks once again for coming on the podcast and I asked the listener, what would you do if you suddenly had a stolen four and a half billion dollars? Ask yourself that?
Lawrence Lewitinn 51:20
Yeah, let's meet up in Brooklyn. where they are and we'll, we'll solve the crime. Yeah, well, I haven't tasted the lifestyle what attracted people to staying in Brooklyn. I grew up there as a little kid I lived there and and I have to admit it is a very appealing kind of a place to be. Definitely I can understand it.