Billions, Money Laundering, YC, and Rappers

The Milk Road

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May 26th, 2022

GM, This is the Milk Road. We help you get a little smarter about crypto every day.

In Today's Email:

🔗 The Bitfinex Robbery
🎮 104 Punks Put Up For Sale
🏠 $10B Crypto Startup

The Bitfinex Robbery

This is a crazy story.

I don’t even know where to start.

Let me lay out the 3 big pieces:

Billions of dollars (one of the biggest robberies ever)
Money laundering
The most cringey rapper I’ve ever heard

Here’s the story in 8 bullet points:

1. In 2016, a big crypto exchange got hacked (Bitfinex) for 120k BTC (~$70M at the time)

2. The hack caused the Bitcoin price to crash 40% in a week.

3. But the hackers couldn’t just cash out, because bitcoin is a public ledger. So everyone could see the coins moving, and no exchange would let them cash out without telling the cops.

4. So most of the bitcoin just sat in a wallet for years, or shuffled very small transactions to try and “launder” the money.

P.S. if you have 90 seconds, Ozark (a hit Netflix TV show)does a great job explaining how money laundering works in this video.

5. All of a sudden last week (5.5 years after the hack), the coins started to move in bigger quantities. It got picked up by the Whale Alert twitter handle, which tracks every move that significant wallets make.

6. The Department of Justice was tracking the coins through a web of transactions, and saw they were moving to a wallet owned by Ilya “Dutch” Lichtenstein & his wife Heather Morgan.

7. This week, the cops raided Ilya's apartment in NYC, and found a bag of burner phones, $40K in cash, and folders on their computers called “Fake personas”, “Passport Ideas”, and “Nickelback Greatest Hits” (ok, made that last one up)

8. They had tried to launder the money via Walmart Gift Cards, Playstation in-game purchases, Uber credits, etc.

OK… now this is where sh*t really starts to get weird.

The couple that held the goods did not look like your typical criminals.

The guy (Ilya) was a YC founder, who did a few startups. I have friends who know him, and here’s what they texted me:

"He seemed so normal"
“He was honestly just like dorky and quiet. A sweet guy who maybe watched too much tv.”
“Seemed like a standard engineer founder tbh.”
“I didn’t get any laundering billions of dollars vibes”

The wife though… she’s just openly weird.

I’m talking, on a scale of 1-to-Kanye, she’s level 12 strange. She is a terrible, awful, no good, very bad, mega-cringe rapper with songs on Spotify. She calls herself the "Crocodile of Wall Street" and "RazzlEkhan"

Here’s a few screenshots from her Youtube channel before they were taken down. (doesn’t look like a criminal mastermind.. Then again…maybe its all part of her plan.. )

So aside from being wildly entertaining and being the plot of a future Netflix show…here’s what this means for Bitcoin:

Kills the Mainstream Narrative that Bitcoin is for criminals. The Deputy Attorney said today in a statement: “Today’s arrests show that cryptocurrency is not a safe haven for criminals.”
Supply shock? Bitfinex said it will use up to 80% of any bitcoin recovered to buy & burn their LEO token (up 56% today on this news), and will do it in a controlled sale over time so that it doesn’t shock the market with huge sell pressure

Oh and the best part? They posted this pic on IG the day before the big hack. What a perfect caption:

Alright, what else we got. Let’s do some quick hits below.

104 Cryptopunks Are For Sale

Sotheby’s announced they are auctioning off 104 Cryptopunks in an auction for $20-$30M. This batch was bought for $7M back in July.

Normally - you get a discount when buying in bulk.

But for collectibles, you normally pay a bit of a premium because it’s hard to acquire a batch of the collectible at once.

Flashback - Ben sent me a message a year ago saying “Mr. Beast's wallet just bought a bunch of Cryptopunks, maybe we should too haha”.

I ignored him because it sounded like a waste of time (f*ck me). And missed out on a $3m+ win.

Here’s a video explaining how Gary Vee had a “secret call” where he convinced Logan Paul, Mr.Beast and a few other wealthy people to all buy into Cryptopunks. Pretty cool to hear these behind-the-scenes stories.