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Deputy Attorney General, alleges that it was Lichtenstein and Morgan who undertook these operations. These methods amounted to the most “state-of-the-art laundering techniques” at the time, Robinson says.

Three years later, as Bitcoin prices spiked, the launderers employed a type of transaction known as a “coinjoin,” using Wasabi Wallet, a privacy wallet designed to prevent blockchain tracing. When Alphabay was shut down by law enforcement in 2017, the perpetrators switched to routing the money through the Russian-language marketplace Hydra, according to Tom Robinson at Elliptic, who has been tracking the money flow of the hack using tracing techniques and other software. The launderers could then simply deposit the money in another Bitcoin wallet with its provenance obscured. By routing crypto through Alphabay, the trail of money on the blockchain itself would run cold. In early 2017, small amounts of money began to exit the wallet through Alphabay, a currency exchange on the dark web that was often used to transact deals for drugs, weapons, and other illicit goods, according to investigators.

Most of the cryptocurrency was simply left in the account to appreciate in value. But to extract it in large withdrawals would arouse plenty of suspicion. The launderingĪfter the hack, the wallet in question had tens of millions of dollars worth of Bitcoin in a single account. “It’s potentially more difficult to prove the hack,” Redbord, who himself worked at the Attorney General’s office for 11 years, says. It’s worth noting that neither Lichtenstein nor Morgan are accused of perpetrating the actual hack. (A wallet is something like a decentralized bank account for cryptocurrency they are unique to each user, but don’t have to be linked to a person’s real-world identity.) The hack upended the entire crypto ecosystem, with the value of Bitcoin plunging about 20% within hours. Some 2,000 transactions were approved from users’ accounts, sending the Bitcoin to one wallet. In 2016, Bitfinex-one of the largest cryptocurrency exchanges at the time-suffered its own security breach. Gox, collapsed in 2014 after hackers exposed security loopholes and made off with $500 million in cryptocurrency. While the currency’s decentralized, unregulated nature was part of its appeal for many, those very traits also made the currency susceptible to attacks. In the mid-2010s, Bitcoin became a tool for drug dealers, tax evaders, libertarians, and speculators alike to move money across the world outside of the watchful eye of traditional financial institutions. “The problem with laundering cryptocurrency is if you make a mistake five years ago, that’s still on the blockchain for everyone to see,” Robinson says. Eventually, the painstaking detective work of government officials, and the innate transparency of the blockchain and its lack of red tape led to the arrests.

Together, along with details in government affidavits they paint a picture of a crypto-savvy couple trying to stay one step ahead of the law and constant advances in blockchain tracking and security.

To get better insight into what happened, TIME spoke with two crypto security experts: Ari Redbord, the head of legal and government affairs at TRM Labs, a cryptocurrency regulatory startup and Tom Robinson, a co-founder of the Blockchain analytics company Elliptic. The anatomy of Lichtenstein and Morgan’s alleged money laundering scheme-and how they got caught-is a cautionary tale in an era of rapid blockchain ascendancy. On Tuesday, a married couple in New York, Ilya Lichtenstein and Heather Morgan, age 34 and 31, were arrested and charged with conspiracy to commit money laundering and conspiracy to defraud the United States. But, once the currency slowly began to move out of the wallet and into the traditional banking system, investigators were able to start tracing the transactions to people in the real world. For years, most of the money sat in that wallet untouched.