$4.5B worth of Bitcoin laundry after Crypto heist

Heather Morgan and Ilya Lichtenstein were arrested last year in New York after police tracked down their assets in connection with a crypto theft.

While evading the police, Morgan poses as a rapper and tech entrepreneur.

As part of the plea agreement, Lichtenstein admitted he was behind the hack.

Both husband and wife pleaded guilty to money laundering, but Morgan pleaded guilty to additional charges of conspiracy to defraud the United States.

Despite trying to cover up his crimes, Morgan released dozens of music videos filled with rap and obscene songs shot in locations around New York City under the name Razzlekhan. In her lyrics, she calls herself a “bad moneymaker” and “the alligator on Wall Street”.

In articles published in Forbes, Morgan also describes herself as a successful female tech entrepreneur, calling herself an “economist, serial entrepreneur, software investor, and rapper”.

But while developing her rap and tech personality, she and her computer programmer husband are trying to cash in on their stolen assets from crypto company Bitfinex.

The pair are currently facing prison sentences with Lichtenstein punishable by up to 20 years in prison and Morgan possibly 10 years.

At the time of their arrest in February 2022, the vault contained 119,000 bitcoins worth about $4.5 billion, making it the largest financial seizure in the history of the US Department of Justice. When the hack was done, the Bitcoins were worth about $71 million.

Court documents detail how the pair earned millions of dollars worth of Bitfinex bitcoins in fiat using sophisticated techniques to try to stay under the radar.

Profile shows the couple:

Split Bitcoin into small amount and transfer it to thousands of different crypto wallets using fake identity

Mix their stolen funds with other criminal cryptocurrencies on darknet market Alphabay
Gold coins bought

Set up shell companies to make Bitcoin funds look legit

The successful police operation is the latest instance of the use of tools capable of analyzing transactions on Bitcoin’s blockchain public ledger.

One of the couple’s biggest mistakes was buying with a Walmart supermarket voucher that was paid for with stolen money.

Jonathan Levin, founder of crypto investigation firm Chainalysis, who was involved in the investigation, said police were able to link Walmart gift cards to some of the proceeds from the Bitfinex hack, subsequently opened a further investigation. “Purchasing gift cards and moving between different exchanges and different cryptocurrencies has never really produced the kind of provenance breakout that the pair had anticipated,” he said.

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When police raided the couple’s Manhattan apartment, they found empty books made to conceal cell phones.

They also discovered dozens of phone burners, several USB drives, and $40,000 in cash.

Police deciphered a spreadsheet detailing the couple’s elaborate money-laundering methods, allowing them to recover nearly all of the money.

In court documents, prosecutors said they had discovered communications recordings showing that Morgan and Lichtenstein planned to flee the United States to Russia, his home country. If successful, they could have lived a life of billionaires, safe from arrest by the United States.

When the hack occurred, Bitfinex customers were forced to “cut their hair”, losing 36% of the assets held by the crypto exchange. In 2019, the company reimbursed the victims, so now the company is based in Hong Kong and some customers have swapped their losses for stocks waiting for their fortunes after the The recovered Bitcoins are returned.