A husband and wife team, who were dubbed as “Bitcoin Bonnie and Clyde” by the media, have pleaded guilty to laundering $4.5 billion worth of Bitcoin that was stolen from a crypto exchange in 2016. Heather Morgan, also known as Razzlekhan, and Ilya Lichtenstein, also known as Dutch, admitted to their roles in the scheme in a federal court in Washington, DC on Thursday.
The couple was arrested in 2022 after a long investigation by the IRS and the FBI, which traced the stolen funds to their digital wallets. The authorities seized more than 119,000 Bitcoins from them, which was the largest financial seizure ever by the US Department of Justice.
The couple had tried to conceal their illicit activities by using pseudonyms, shell companies, darknet marketplaces, and gold coins. They also lived a lavish lifestyle in New York, where Morgan posed as a rapper and a tech entrepreneur, while Lichtenstein was a computer programmer.
Lichtenstein Confesses to Being the Hacker Behind the Bitfinex Attack
Lichtenstein also revealed that he was the original hacker who breached the crypto exchange Bitfinex in 2016 and stole the Bitcoins from its customers. The hack was one of the biggest cyberattacks in the history of cryptocurrency and caused a major drop in the price of Bitcoin at the time.
Lichtenstein said he exploited a vulnerability in Bitfinex’s security system and transferred the Bitcoins to his own wallet. He then split them into smaller amounts and moved them to thousands of other wallets with fake identities. He also mixed them with other criminal funds on Alphabay, a darknet marketplace that was shut down by the authorities in 2017.
Lichtenstein entered into a cooperation agreement with the government, agreeing to testify and meet with law enforcement when requested. He faces up to 12-and-a-half years in prison and up to a $350,000 fine.
Morgan Pleads Guilty to Money Laundering and Conspiracy to Defraud the US
Morgan pleaded guilty to money laundering and conspiracy to defraud the US. She admitted that she helped Lichtenstein cash out some of the stolen Bitcoins into traditional money using various methods. She also spent some of the money on luxury items, such as jewelry, cars, and clothes.
Morgan also created a rap persona called Razzlekhan, under which she posted music videos and songs on social media. She claimed to be a “bad-ass money maker” and “the crocodile of Wall Street” in her lyrics. She also wrote articles for Forbes magazine as a tech businesswoman, calling herself an “economist, serial entrepreneur, software investor and rapper”.
Morgan faces up to 10 years in prison and up to a $250,000 fine.
The Case Highlights the Challenges of Regulating Cryptocurrency
The case of Razzlekhan and her husband is one of the most high-profile examples of how cryptocurrency can be used for criminal purposes. It also shows how difficult it is for law enforcement to track and recover stolen funds on the blockchain, which is a public ledger of transactions that is supposed to be transparent and secure.
The authorities used advanced techniques to analyze the transactions on the blockchain and link them back to the couple. They also relied on clues from their online activities, such as their social media posts and their purchases with Walmart gift cards that were paid for with the stolen funds.
The case also raises questions about how cryptocurrency should be regulated and taxed. The US government has been trying to establish clear rules and guidelines for crypto businesses and users, but there are still many challenges and uncertainties. Some experts argue that more regulation is needed to prevent fraud and money laundering, while others warn that too much regulation could stifle innovation and privacy.
