Inside the Bitcoin Laundering Case That Confounded the Internet

Inside the Bitcoin Laundering Case That Confounded the Internet

by Virtuse Admin
17. February 2022
Inside the Bitcoin Laundering Case That Confounded the Internet

The arrests of Ilya Lichtenstein and Heather Morgan left the world of cryptocurrency incredulous: Could this goofy young couple have been Bitcoin’s Bonnie and Clyde?


When anonymous hackers infiltrated the cryptocurrency exchange Bitfinex in 2016, it shook the nascent world of digital currency and prompted speculation about who might have stolen what was then $71 million in Bitcoin.

But unlike traditional financial transactions, Bitcoin trades are publicly visible — moving the coins risked revealing who was behind the heist. And so for six years, as the value of Bitcoin soared, the loot sat in plain sight online as tiny fractions of the giant sum occasionally disappeared in a blizzard of complex transactions.

It was as if a robber’s getaway car was permanently parked outside the bank, locked tight, money still inside.

And then, this month, the car sped off.

In the strange and sometimes shadowy world of cryptocurrency, it was as if the earth shook. In the years since the Bitfinex hacking, crypto had exploded into the mainstream, and the theft had become notorious: a bounty worth over $4 billion. At last, it seemed, the hackers had emerged from hiding.

But it was not the hackers who had moved the stolen Bitcoin — it was the government, which had seized it as part of an investigation into two New York City entrepreneurs: one a little-known Russian émigré and tech investor; the other, his wife, an American businesswoman and would-be social media influencer with an alter ego as a satirical rapper named Razzlekhan.

Charged with conspiring to launder billions of dollars in Bitcoin, the couple, Ilya Lichtenstein, 34, and Heather Morgan, 31, were accused of siphoning off chunks of the purloined currency and trying to hide it in a complex network of digital wallets and internet personas. If convicted of that and a second conspiracy count, they could face up to 25 years in prison.

The arrests shocked some acquaintances of the couple, whose goofy online lives appeared at odds with prosecutors’ description of them as sophisticated criminals with stacks of foreign currency, multiple fake identities and dozens of encrypted devices stashed in their Manhattan apartment. As they awaited a Monday court hearing in Washington on whether they should be freed on bail, Mr. Lichtenstein and Ms. Morgan remained the subject of a confounding question: Could they really be at the center of one of cryptocurrency’s enduring mysteries?

The charges were a watershed in the evolving regulation of digital currency and, to some, a step forward in the government’s ability to trace its illegal laundering.

“The crypto space has always been seen as like a safe haven for criminals,” said Christopher Tarbell, a former F.B.I. special agent who helped lead the investigation into the Silk Road online marketplace for illegal drugs and other illicit goods.


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