US Government Cryptocurrency Wallet Loses 20 Million in Suspicious Transactions

Coin World reports:
Stablecoins worth over $20 million and Ethereum have been transferred out of a wallet containing funds seized by the US government on Thursday, with assets related to the 2016 Bitfinex hack being moved to an address from five days ago, described by a chain analysis firm as a possible theft.
Some of the funds have now been transferred to so-called “instant exchanges,” including one exchange that obtained liquidity from Binance, an offshore exchange and the world’s largest cryptocurrency trading platform.
Minutes before the transfer occurred, blockchain analysis firm Arkham Intelligence highlighted the withdrawal of a loan agreement with Aave on Twitter. The company stated that this was the first use of these funds in eight months.
According to Arkham’s platform, $1.25 million in stablecoins have been withdrawn from Aave, along with $5.5 million USDC. These funds were then sent to a wallet starting with “0x348,” alongside $446,000 worth of Ethereum and $13.7 million worth of aUSDC, an interest-bearing token representing USDC deposited in the Aave lending market.
Two years ago, the government-controlled wallet received millions of dollars in Tether. On the same day, it also received a significant amount of Aave-based tokens equivalent to Tether.
Anonymous blockchain investigator ZachXBT described this activity as “nefarious” on Twitter. The investigator suggested that the most likely scenario is that these funds were flowing due to “theft.”
Bitfinex was hacked in 2016 by a married couple from New York City who later pleaded guilty to a money laundering conspiracy. According to a press release from the US Department of Justice, Ilya Lichtenstein and Heather Morgan exploited vulnerabilities in the exchange, resulting in the seizure of $3.6 billion in digital assets in August 2023.
When asked if these transfers were related to law enforcement activity, the Department of Justice did not immediately respond.
On Thursday, the wallet that received millions of dollars in government-associated funds started using the exchange aggregator 1inch to convert stablecoins into Ethereum. It then began transferring Ethereum blocks worth $40,000 to Binance’s deposit address, which ZachXBT marked as suspicious behavior.
As of the time of writing, $320,000 worth of Ethereum has been sent to the exchange. Meanwhile, $80,000 worth of Ethereum has been split into other wallets.
Commenting on the transfer to Binance, ZachXBT clarified that transfers to Binance don’t necessarily go to the leading cryptocurrency exchange. Instead, they appear to be sent to so-called “nested exchanges” that use Binance as a source of liquidity.
Regarding the wallet starting with “0x348,” it made its first transaction less than a week ago. The wallet that provided funds to it received its initial funds two years ago from the Australian cryptocurrency exchange CoinSpot, which does not operate in any other jurisdiction.
At the time of writing, the government-controlled wallet is nearly empty. All of its assets, except for $127 worth of Donald Trump-themed meme coins, have disappeared.
Editor: Andrew Hayward
Editor’s note: This report has been updated since publication to clarify the context of the transactions involving Binance.