The U.S. Justice Department has seized $3.6 billion from a married couple in New York who allegedly conspired to launder $4.5 billion worth of stolen BTC directly connected to a 2016 hacker attack of the Bitfinex crypto exchange.
Ilya “Dutch” Lichtenstein, 34, and his wife, Heather Morgan, 31 — who raps under the name “Razzlekhan” — were arrested on Tuesday, Feb. 8 in Manhattan.
According to court documents, Lichtenstein and Morgan allegedly conspired to launder the proceeds of 119,754 Bitcoin stolen from Bitfinex when an unnamed hacker attacked the Hong Kong-based crypto exchange in 2016. The stolen Bitcoin moved around through more than 2,000 unauthorized transactions that eventually led to a digital wallet under Lichtenstein’s control, the DOJ said in a statement.
At the time of the 2016 Bitfinex hacker attack, the stolen bitcoin was valued at around $70 million, officials said. The hack caused the price of Bitcoin to drop sharply, Wall Street Journal reported. The stolen Bitcoin was valued at around $4.5 billion in February 2022.
Lichtenstein, a Russian-U.S. national, studied psychology at the University of Wisconsin from 2006 to 2010 while also working on the side in internet marketing, according to LinkedIn. After graduation, he co-founded tech company MixRank, which was funded with the help of Y Combinator and other early investors including billionaire Mark Cuban, according to Crunchbase. Lichtenstein has since advised startups and became an angel investor “interested in blockchain technology, automation, and big data,” according to Rolling Stone.
Morgan is a self-described “serial entrepreneur” who has worked in tech for 10 years. She was a Forbes contributor from 2018 to 2021, a surrealist artist “whose beyond-trippy pieces are often inspired by her synesthesia and sometimes include prosthetic eyeballs, and an outlandish rapper who spits about villainous capitalists.” Her artist name, Razzlekhan, “is like Genghis Khan, but with more pizzazz” according to her website.
The couple did not have splashy spending habits and didn’t live a lavish lifestyle, according to a friend of Morgan. They had a modest wedding in November and often used air miles to fly, although they were planning to buy a $2 million apartment in New York, Wall Street Journal reported.
They allegedly used their laundered proceeds to buy assets including gold, nonfungible tokens and Walmart gift cards, officials said.
Responses on Twitter ranged from admiration to skepticism that the couple had the ability to pull off the hacker attack alone, and amazement at the scale and strangeness of the crime to embarrassment over the quality of Morgan’s rapping.
“I think is too naive to think it was them 2 the 2016 hackers….Anyway, LOL!” tweeted Intuitive Guy in response to a video posted online.
“honestly, these are the criminals we deserved,” tweeted Mike DAOdas.
“Today’s arrests, and the department’s largest financial seizure ever, show that cryptocurrency is not a safe haven for criminals,” said Deputy Attorney General Lisa O. Monaco. “In a futile effort to maintain digital anonymity, the defendants laundered stolen funds through a labyrinth of cryptocurrency transactions. Thanks to the meticulous work of law enforcement, the department once again showed how it can and will follow the money, no matter what form it takes.”
“Today, federal law enforcement demonstrates once again that we can follow money through the blockchain, and that we will not allow cryptocurrency to be a safe haven for money laundering or a zone of lawlessness within our financial system,” said Assistant Attorney General Kenneth A. Polite Jr. of the Justice Department’s Criminal Division.
“I believe she should have already been in prison for life for whatever this is” tweeted Letting Go.
The couple appeared in a Manhattan court Tuesday, with bond set at $5 million for Lichtenstein and $3 million for Morgan, with their parents’ homes posted as security, Wall Street Journal reported. The couple is prohibited from having devices with internet access and from conducting crypto transactions.
Anirudh Bansal, a lawyer for Lichtenstein and Morgan, told the judge that his clients had been aware of the government’s investigation since November and hadn’t tried to flee the country.
Lichtenstein and Morgan are charged with conspiracy to commit money laundering and conspiracy to defraud the U.S. but not with the hacker attack of Bitfinex. The DOJ investigation is ongoing.
“Today’s arrests, and the department’s largest financial seizure ever, show that cryptocurrency is not a safe haven for criminals,” said Deputy Attorney General Lisa O. Monaco. “In a futile effort to maintain digital anonymity, the defendants laundered stolen funds through a labyrinth of cryptocurrency transactions.”
Despite the so-called anonymity of the blockchain, the arrests are a reminder that it is public and intractable.
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“Today, federal law enforcement demonstrates once again that we can follow money through the blockchain, and that we will not allow cryptocurrency to be a safe haven for money laundering or a zone of lawlessness within our financial system,” said Assistant Attorney General Kenneth A. Polite Jr. of the DOJ’s Criminal Division.
As hacker attacks evolve, “so do the tools authorities have to track them,” said Ari Redbord, a former senior Treasury Department official who works at the blockchain analytics firm TRM Labs. “The blockchain is forever.”
“Ilya Lichtenstein and his wife Heather Morgan attempted to subvert legitimate commerce for their own nefarious purposes, operating with perceived anonymity,” said Steve Francis, said acting executive associate director of Homeland Security Investigations (HSI). “Today’s action demonstrates HSI’s commitment and ability to work with a collation of the willing to unravel these technical fraud schemes and identify the perpetrators, regardless of where they operate.”
“The strangest crypto story of the year (so far, at least),” tweeted Jack Niewold, founder of the Crypto Pragmatist email newsletter.
Photo: Heather Morgan and Ilya Lichtenstein in a private jet, Instagram