How the couple dispersed nearly 120,000 Bitcoins

Ilya Lichtenstein and Heather Morgan were once admired figures in the cryptocurrency community, living lavish lives until their arrest.

On August 3rd, Ilya Lichtenstein and Heather Morgan will appear in a US federal court to answer questions related to orchestrating an elaborate scheme to sell 119,754 Bitcoins from the 2016 Bitfinex hack. Both attempted to disperse and planned identity changes to escape.

As of their arrest in February 2022, the stolen Bitcoins was valued at around $4.5 billion USD, now approximately $3.6 billion USD, marking the largest financial seizure executed by the US Department of Justice.

According to federal prosecutors, Lichtenstein and Morgan “employed various sophisticated money laundering techniques,” such as creating fake identities to set up online accounts, sending funds to cryptocurrency exchanges and the dark web market, and converting them into different cryptocurrencies to obfuscate traces. If convicted, each individual could face a 25-year prison sentence.

Extravagant and Glamorous

Lichtenstein bears both Russian and American heritage. He moved to the United States at the age of 6, grew up in the suburbs of Chicago, and obtained US citizenship in 2002. Morgan was born in Oregon and raised in California, but she also lived in Hong Kong and Egypt.

Before coming under scrutiny, Lichtenstein referred to himself as a “tech entrepreneur,” well-versed in the realm of cryptocurrencies, blockchain, and emerging technologies. On the other hand, Morgan, who goes by the nickname Razzlekhan, dubbed herself the “Crocodile of Wall Street,” a rapper, entrepreneur, and media personality adorned with tattooed hands, and “akin to Genghis Khan but with a more unconventional style.” Morgan even spent significant amounts of money to produce music videos primarily posted on YouTube.

The two married in 2019 with a lavish proposal described as “surreal, mysterious, eerie, and alluring.” Their tender moments were later displayed on a billboard in Times Square (New York).

Tarun Chitra and Ruthie Nachmany from the company providing the NYC Salon, who met Morgan in 2019, describe her as someone who loves to boast. “She claimed to have flown first class from Japan to the US, had lunch at a French-style restaurant downtown. Morgan also bragged about receiving over 10,000 emails in a decade and helping 720 companies overcome challenges,” they told Bloomberg.

Lichtenstein and Morgan also appeared at numerous cryptocurrency events in the US and around the world, as well as regularly featuring on YouTube to share their experiences in cryptocurrency investing. With their appearance, it wasn’t difficult for them to persuade many listeners to follow suit.

However, on the morning of February 8th, 2022, the cryptocurrency community was shocked when the US Department of Justice announced the arrest of Lichtenstein and Morgan on money laundering charges. Initially, a judge granted both of them bail under the condition that Morgan pay a $3 million bond and Lichtenstein pay a $5 million bond. However, a judge in Washington later ordered their urgent arrest and detention, stating that they were “sophisticated cyber criminals and money launderers who pose a serious risk to society.”

Meticulously Planned but Ultimately Failed

According to prosecutors, the story began in August 2016 when the cryptocurrency exchange Bitfinex was hacked. 119,754 Bitcoins were transferred to a wallet controlled by Lichtenstein. This amount was equivalent to $71 million USD in January 2017.

The United States Internal Revenue Service (IRS) later put Lichtenstein under scrutiny. According to the agency, thousands of transactions were conducted through dozens of accounts, but the ultimate destination was the personal accounts of Lichtenstein and Morgan.

At the time, both claimed to be wealthy due to investments in Bitcoins prior to 2015. However, Lichtenstein took careful notes of his plan and stored them in the cloud. Among the documents found by authorities was a list of 2,000 cryptocurrency addresses and wallet keys, all potentially traceable back to the hack. Additionally, investigators discovered an Excel file containing login information for hundreds of cryptocurrency accounts on various trading platforms, including notes on which accounts had been frozen.

Prosecutors also discovered documents indicating that the couple was planning to flee to Russia by changing their names. A directory named “Personas” was stored in the cloud containing information on how to use the dark web to obtain fake identities.

During the search of the couple’s home, authorities found hollowed-out books, dozens of electronic devices, a bag labeled “Burner phones,” along with $40,000 in cash and foreign currency.

A day before their court appearance, Morgan was placed under house arrest, but she boasted of working as a “growth marketing and business development expert” at a technology company. Meanwhile, Lichtenstein has remained in custody since his arrest the previous year.