Heather Morgan and her husband Ilya “Dutch” Lichtenstein are expected to plead guilty to bitcoin laundering scheme.
AP Photo/Elizabeth Williams
The “crypto couple” Ilya Lichtenstein and Heather Morgan are due for a plea hearing on August 3.
The couple is expected to plead guilty to orchestrating a $4.5 billion bitcoin-laundering scheme.
They were arrested in 2022 following what federal prosecutors called the “largest financial seizure ever.”
The husband-wife duo ensnared in an alleged $4.5 billion bitcoin-laundering scheme are due in federal court for a hearing on August 3, and are expected to plead guilty to charges that they orchestrated an elaborate plot to sell bitcoin that was stolen during the 2016 hack of Bitfinex.
Ilya Lichtenstein and Heather Morgan, an eccentric couple known for walking a leashed Bengal cat in Manhattan and for Morgan’s rap performances under the name “Razzlekhan,” were arrested in February of 2022 following what the Department of Justice said was its “largest financial seizure ever.” The second-largest occurred later that same year, when the feds seized $3.36 billion worth of bitcoin that had been stolen from a darknet website years earlier.
Federal prosecutors have alleged that Lichtenstein and Morgan “employed numerous sophisticated laundering techniques,” creating fake identities to set up online accounts, depositing the funds into virtual currency exchanges and darknet markets, and converting it into other virtual currencies — all to cover their tracks.
Lichtenstein and Morgan are charged with conspiracy to commit money laundering and conspiracy to defraud the United States. Together, the charges carry a maximum penalty of 25 years in prison.
An attorney for both Lichtenstein and Morgan did not respond to Insider’s request for comment ahead of Thursday’s plea hearing.
Olivier Douliery/Getty Images
The saga began in August 2016 when the cryptocurrency exchange Bitfinex was hacked. As Insider previously reported, Lichtenstein and Morgan were not accused of carrying out the hack itself, but as a result of the hack, 119,754 bitcoin were moved into an outside wallet Lichtenstein controlled.
That bitcoin amounted to $71 million by January 2017, at which point, the IRS began tracing thousands of transactions moving through dozens of different accounts — eventually landing in Lichtenstein and Morgan’s personal accounts.
At the time, the couple said the bitcoin came from investments that predated 2015, but Lichtenstein kept highly detailed notes about the scheme in cloud storage, which authorities eventually gained access to. Among the documents authorities found were a list of 2,000 virtual currency addresses and their private keys, all which could be traced back to the hack. Authorities also found a spreadsheet with cryptocurrency exchange account login information, with notes about which accounts were frozen.
Prosecutors also alleged that Lichtenstein and Morgan had been planning to flee to Russia under new identities.
Authorities found a folder in Lichtenstein’s cloud storage labeled “personas” with information on how to use the dark web to obtain fake identities. And while executing a search warrant on the couple’s home, authorities also found hollowed-out books, dozens of electronic devices, a bag labeled “burner phones,” $40,000 in cash, and other foreign currency.
Since their 2022 arrests, Morgan has been on house arrest with a $3 million bond, and court records said she has a new job as a “growth marketing and business development specialist” at an undisclosed tech company. Lichtenstein, whom prosecutors have described as a flight risk due to his Russian citizenship, has remained incarcerated.