Couple admit they laundered $4B in stolen Bitcoins after Bitfinex super-heist
A man, a plan, and Razzlekhan fought the law – and the law won
Ilya Lichtenstein and Heather Morgan on Thursday pleaded guilty to money-laundering charges related to the 2016 theft of some 120,000 Bitcoins from Hong Kong-based Bitfinex.
The Feds arrested Lichtenstein, 35, and Morgan, 33, in February 2022 following the US government's tracing of about 95,000 of the stolen BTC – worth about $3.6 billion at the time and $2.8 billion today – to digital wallets controlled by the married couple.
The Justice Department at the time described the seizure as the largest ever and has since recovered an additional $475 million.
Lichtenstein, a Russian national, founded MixRank, a marketing firm, and Endpass, a decentralized identity platform, and owned a single-member investment entity called Demandpath. Morgan was the CEO of SalesFolk, a marketing firm, and briefly became something of an internet celebrity for her entrepreneurial rapping under the name Razzlekhan.
Lichtenstein admitted in court he gained access into Bitfinex's network using unidentified tools and techniques. According to prosecutors, once inside, Lichtenstein proceeded to initiate more than 2,000 fraudulent transactions that sent 119,754 bitcoin from Bitfinex into a cryptocurrency wallet he controlled.
Thereafter, the Justice Department said, he tried to cover his tracks by deleting access credentials and log files, and then involved Morgan to help launder the stolen funds by transferring them through a maze of financial accounts. At one point Lichtenstein used some of the funds to buy gold coins, which were then buried by Morgan.
An affidavit [PDF] from IRS investigator Christopher Janczewski, which documents the basis of the US government's case, traces the flow of stolen funds through multiple accounts associated with the defendants.
Shortly before the couple's arrest, the affidavit says, the Feds "gained access to wallet 1CGA4s by decrypting a file saved to Lichtenstein's cloud storage account, 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. Blockchain analysis confirmed that almost all of those addresses were directly linked to the hack."
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Janczewski noted that some of the information that helped investigators came from "private entities that the US government believes to be reliable," and that some of these may be financially motivated, specifically by "a sizable reward related to the return of the stolen funds" offered by Bitfinex.
In July, Bitfinex announced that it received $312,219.71 in cash and 6.917 BCH from the United States Department of Homeland Security related to the 2016 robbery. It is using the recovered funds to redeem Recovery Right Tokens (RRTs) issued to account holders after the incident as a form of speculative compensation to the attack's victims.
Lichtenstein faces up to 20 years in prison after pleading guilty to conspiracy to commit money laundering. Morgan pleaded guilty to two counts – money laundering conspiracy and conspiracy to defraud the US – and faces up to five years in prison for each count. ®