UPDATE (7:00 p.m. ET): Lichtenstein and Morgan were granted bail on Tuesday following a court appearance in Manhattan. According to Inner City Press, Lichtenstein was granted a $5 million bond and Morgan was granted a $3 million bond.

Both Lichtenstein and Morgan remain under detention until the bond agreements are finalized and signed.

The US Department of Justice said Tuesday that it has seized $3.6 billion worth of bitcoin tied to the 2016 hack of crypto exchange Bitfinex.

Two individuals, Ilya Lichtenstein and Heather Morgan, were arrested in New York and are expected to appear in court Tuesday afternoon. The two are charged with conspiracy to commit money laundering and conspiracy to defraud the United States. They face as many as 25 years in prison if convicted.

The DOJ detailed the seizure operation in a press release, explaining:

"According to court documents, Lichtenstein and Morgan allegedly conspired to launder the proceeds of 119,754 bitcoin that were stolen from Bitfinex’s platform after a hacker breached Bitfinex’s systems and initiated more than 2,000 unauthorized transactions. Those unauthorized transactions sent the stolen bitcoin to a digital wallet under Lichtenstein’s control. Over the last five years, approximately 25,000 of those stolen bitcoin were transferred out of Lichtenstein’s wallet via a complicated money laundering process that ended with some of the stolen funds being deposited into financial accounts controlled by Lichtenstein and Morgan. The remainder of the stolen funds, comprising more than 94,000 bitcoin, remained in the wallet used to receive and store the illegal proceeds from the hack."

"After the execution of court-authorized search warrants of online accounts controlled by Lichtenstein and Morgan, special agents obtained access to files within an online account controlled by Lichtenstein. Those files contained the private keys required to access the digital wallet that directly received the funds stolen from Bitfinex, and allowed special agents to lawfully seize and recover more than 94,000 bitcoin that had been stolen from Bitfinex. The recovered bitcoin was valued at over $3.6 billion at the time of seizure."

Notably, the amount seized corresponds to a series of transactions of Bitfinex hack-tied BTC on February 1. According to a statement of facts issued by the Department of Justice, investigators gained access to the wallets on January 31, meaning the February 1 transactions took place one day later.

As explained in the statement of facts, attributed to special agent Christopher Janczewski:

"On January 31, 2022, law enforcement gained access to Wallet 1CGA4s by decrypting a file saved to LICHTENSTEIN’s cloud storage account,8 which had been obtained pursuant to a search warrant. The file contained a list of 2,000 virtual currency addresses, along with corresponding private keys.9 Blockchain analysis confirmed that almost all10 of those addresses were directly linked to the hack. Between January 31, 2022, and February 1, 2022, law enforcement obtained approval to execute a lawful seizure supported by probable cause under exigent circumstances and used the private keys from LICHTENSTEIN’s file to seize Wallet 1CGA4’s remaining balance of approximately 94,636 BTC, worth $3.629 billion. On February 2, 2022, the government requested, and on February 4, 2022, a court issued a seizure warrant authorizing the seizure of those funds. Those funds remain secured in the U.S. Government’s possession."

In a statement, Bitfinex said that it "will work with the DOJ and follow appropriate legal processes to establish our rights to a return of the stolen bitcoin." The exchange also said that it "will, within 18 months of the date it receives that recovery use an amount equal to 80% of the recovered net funds to repurchase and burn outstanding UNUS SED LEO tokens."

"These token repurchases can be accomplished in open market transactions or by acquiring UNUS SED LEO in over-the-counter trades, including directly trading bitcoin for UNUS SED LEO," Bitfinex continued.

According to market data, the price of LEO has surged significantly, jumping more than 60% as of press time.

This breaking news story will be updated.