A crypto wallet, allegedly controlled by the U.S. government, was hacked on October 24, resulting in a $20 million loss, according to on-chain analysis by Arkham Intelligence. The compromised wallet held digital assets seized from the 2016 Bitfinex hack, a major incident involving 120,000 Bitcoin stolen by Ilya Lichtenstein, with current value over $8 billion.

Arkham Intelligence disclosed that the hacker swiftly moved funds into a new wallet beginning with "0x348," holding assets like USD Coin (USDC), Tether, aUSDC, and Ether (ETH). The hacker has begun converting stablecoins to Ethereum, transferring funds to wallets likely associated with known laundering services, attempting to obscure the trail.

The Bitfinex hack dates back to 2016, when Lichtenstein, alongside his wife Heather Morgan, executed the theft. Arrested in 2022, the couple was found with the largest ever crypto seizure by the U.S. Department of Justice. In a plea deal, they admitted to charges of money laundering and conspiracy, with Lichtenstein acknowledging his role as the actual hacker.

As sentencing approaches, U.S. prosecutors have recommended an 18-month sentence for Morgan due to her cooperation and lesser involvement, and five years for Lichtenstein, significantly reduced from an initial 20-year recommendation. Prosecutors highlighted his cooperation and lack of prior offenses as factors in their decision.

This hack underscores ongoing security risks, even for government-controlled wallets, raising new concerns around the safeguarding of seized digital assets.