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They described themselves as “serial entrepreneurs” focused on bitcoin technology and the B2B space, but prosecutors say the only business they seemed to be doing was laundering stolen money.
On the surface, Ilya Lichtenstein, 34, and Heather Morgan , 31, seemed like an enthusiastic hipster couple trying to make it big in tech. But federal prosecutors say they were secret criminals sitting atop a huge cache of stolen bitcoin
BTCUSD,
whose value was shooting through the roof. They were arrested Tuesday morning in Manhattan on charges of conspiracy to commit money laundering and to defraud the U.S. government, authorities said.
When hackers made off with approximately 120,000 bitcoin from the Bitfinex currency exchange in 2016, it was worth around $71 million. With the wild upswing in the value of the cryptocurrency, it would now be worth around $4.5 billion.
That presented serious problems for the couple, who have allegedly struggled for the past five years to launder the ever-increasing pile of money, prosecutors said. The pair had appeared to have managed to launder only about 20% of it, according to court papers. Investigators say they seized about 90,000 bitcoin worth around $3.6 billion last week from virtual wallets controlled by the couple.
“As the value of the money grew, this likely became a far more complex scheme than they believed they were getting into when it started,” said attorney Rachel Fiset, of Zweiback, Fiset and Coleman, who specializes in complex financial fraud cases. “It was going to catch up to them at some point because the pot just kept growing. You can’t just hold a few billion dollars for five years unnoticed.”
The duo were scheduled to appear in court Tuesday, authorities said. They have not been charged with perpetrating the hack itself.
The couple couldn’t immediately be reached for comment, and it wasn’t clear whether they had retained attorneys.
Lichtenstein, who went by the name “Dutch,” is a dual U.S. and Russian citizen, prosecutors said. On his Facebook page, he described getting engaged to Morgan in 2019 after years of dating “the woman of my dreams.”
Infamous crocodile of Wall Street
In her LinkedIn profile, Morgan described herself as a serial entrepreneur originally from California, and an “irreverent comedic rapper,” who performed under the name Razzlekhan, “the infamous crocodile of Wall Street.” She is also a writer who has contributed articles to Inc. and Forbes. She listed being able to speak eight languages on her LinkedIn page, including Arabic, Cantonese, Korean and Furbish, the made-up language spoken by the popular, hamster-like toy, the Furby.
In court papers, prosecutors said the couple had tried to use accounts tied to their startups to bring the ill-gotten money back into the legitimate economy.
Mysterious money
At one point, Morgan approached the bank holding her account for her company, SalesFolk — which specialized in copywriting cold-pitch emails for businesses — and said that many of her clients were asking to send her payments in bitcoin. She also said she had some bitcoin Lichtenstein had given her years earlier that she wanted to take out of “cold storage” to help finance business expansion.
Prosecutors say the bitcoin she moved into her accounts was stolen from Bitfinex.
Court documents also described how Lichtenstein had similarly explained the transfer of some $2.9 million in bitcoin into accounts for companies he ran, called Endpass and Demandpath. Endpass was purportedly a crypto-wallet company and Demandpath purported to be engaged in “boutique micro-fund investing in the next generation of promising technologies.”
While the couple presented the transfers as legitimate business transactions, prosecutors say they really were employing “numerous sophisticated laundering techniques.”
Prosecutors said they had been tracking the money for years and finally were able to recover it after getting a search warrant for a cloud-computing account the couple owned, where investigators found the keys for hundreds of crypto accounts containing some $3.6 billion of the stolen money.
