Couple to Plead Guilty in $4.5 Billion Bitcoin-Laundering Case

A married New York couple charged with conspiring to launder billions of dollars of bitcoin that was stolen in the 2016 hack of crypto exchange Bitfinex are set to plead guilty, according to a court order and a person familiar with the matter. 

Federal prosecutors in Washington, D.C., charged Ilya Lichtenstein and Heather Morgan in February 2022 after investigators used software to trace stolen digital currency to accounts the two owned. Each was charged with conspiring to launder money and conspiring to defraud the U.S.

The husband, who promoted himself as a tech entrepreneur, and the wife, an aspiring rapper, weren’t accused of the hack of Hong-Kong based Bitfinex’s network, which involved the movement of bitcoin—then worth about $71 million—through more than 2,000 unauthorized transfers to an outside account. When Morgan and Lichtenstein were arrested, the value of the stolen cryptocurrency had ballooned to $4.5 billion. Prosecutors said at the time that they had seized more than $3.6 billion in bitcoin linked to the hack.

U.S. District Judge Colleen Kollar-Kotelly set Aug. 3 as the date to hold plea hearings for Morgan, who has been under home confinement, and Lichtenstein, who has been detained since being charged. Unknown is what offenses they will admit to as part of their pleas.

A lawyer for Morgan declined to comment. Lawyers for Lichtenstein didn’t respond to a request for comment. A spokeswoman for the U.S. attorney’s office for the District of Columbia, which is handling the case, declined to comment.

At the time of their arrests, Morgan and Lichtenstein were living in an apartment in lower Manhattan and had been running marketing-related businesses. Morgan also made rap music under the name Razzlekhan. She described herself as the “Crocodile of Wall Street” in one of her songs and dedicated it to hackers and entrepreneurs.

When investigators searched the couple’s home, they found a bag of burner phones, $40,000 in cash and a device with an electronic file that had fake identities used to open bitcoin accounts, prosecutors said. Another file found had information on how to buy passports on the dark web, according to prosecutors.

During a 2019 trip to Ukraine, Lichtenstein, who holds dual U.S. and Russian citizenship, also updated files on a cloud-storage account that had information on money laundering and fake-identity documents with Ukrainian connections, prosecutors said.

The couple is accused of using some of their laundered proceeds to buy gold, nonfungible tokens and Walmart gift cards. Investigators linked the stolen bitcoin to the defendants with the help of software that can track the movement of digital currency, even after it has been laundered through obfuscation techniques, said Ari Redbord,

Write to James Fanelli at [email protected]