Ilya Lichtenstein and Heather Morgan, a Manhattan couple of self-described tech entrepreneurs, were charged this week with laundering billions of dollars in stolen cryptocurrency.
The Department of Justice alleged Tuesday that Lichtenstein and Morgan were engaged in a years-long, complex scheme to launder almost 120,000 Bitcoin (BTC) — about $4.5 billion USD — that was stolen from a digital exchange in a 2016 cyber attack.
Federal officials said they recovered $3.6 billion worth of the stolen crypto as of this week, which would make the bust the single largest financial seizure in the history of the Justice Department.
Lichtenstein, 34, and Morgan, 31, were taken into police custody in Manhattan on Tuesday morning, prosecutors said. They were arraigned before a federal judge that afternoon and were later released on a combined $8 million secured bond, according to reports.
“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 written statement.
“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.”
Couple Charged in Billion-Dollar Crypto Bust
When a still-unknown hacker stole 119,754 BTC from digital exchange website Bitfinex in 2016, their ill-gotten gains were valued at just $72 million.
Neither Lichtenstein nor Morgan has been directly charged with the cyber-attack. But according to documents filed in federal court, investigators believe the stolen crypto was quickly wired over to a digital wallet owned by Lichtenstein.
“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 [the couple,]” prosecutors claimed.
The remaining 94,000 BTC was allegedly still sitting in the same digital wallet, apparently waiting to be laundered when it was seized by federal investigators who had hacked Lichtenstein’s computer with court approval.
Officials said that Lichtenstein and Morgan used an intricate series of smokescreens and ruses to cleanse the stolen crypto, including using “fictitious identities” to make online banking profiles, running software to perform rapid, automated currency transactions between the sock-puppet accounts, depositing and withdrawing the coins on various digital exchanges to cover their tracks, and trading the Bitcoin for other cryptocurrencies.
Bitfinex reportedly said it is in talks with the Justice Department to “establish our rights to a return of the stolen Bitcoin.”
Ilya Lichtenstein, Heather Morgan Face Prison
Lichtenstein and Morgan were charged with federal conspiracy to commit money laundering, a felony that could carry up to 20 years behind bars if either is convicted.
At their arraignment Tuesday afternoon, federal Magistrate Judge Debra Freeman set bail for the husband and wife at $5 million and $3 million, respectively. Lichtenstein was released on bond after offering up his parents’ home as collateral and finding five cosigners. Morgan was released after making bail with three cosigners.
Judge Freeman ordered that the couple remain on house arrest with electronic monitoring as a condition of their pretrial release, reports added. It’s not immediately clear when they’re due back in court.
Ilya Lichtenstein, according to media reports, holds dual-citizenship in the United States and Russia. On his LinkedIn page, the 34-year-old appears to go by the nickname “Dutch” and describes himself as a “Technology entrepreneur, coder and investor.”
Heather Morgan, meanwhile, is an aspiring rapper under the stage name “Razzlekhan,” a persona she describes as “like Genghis Khan, but with more pizzazz” on her website. She’s also something of a financial and lifestyle guru on her Instagram page.
According to a post on Facebook, the couple were engaged in 2019 and married last year.