New York man Bitfinex hack in bitcoing money launder plea

Booking photos for Heather Morgan and Ilya Lichtenstein.

Courtesy: Alexandria Adult Detention Center.

A New York man on Thursday admitted being the original hacker of bitcoin in the 2016 hack on Bitfinex he pleaded guilty in federal court to a conspiracy to launder the stolen cryptocurrency, which ended up being worth $4.5 billion.

The guilty plea by Ilya “Dutch” Lichtenstein in Washington, D.C., came before his wife, Heather Rhiannon Morgan, was expected to appear in the same courthouse for her own plea hearing in the case, which led to the biggest financial seizure in Department of Justice history.

Until Thursday’s admission in court by Lichtenstein, it was not publicly known who had hacked the bitcoin from the cryptocurrency exchange Bitfinex.

Lichtenstein, who is a Russian emigre, has been held without bond since his arrest in February 2022 with his wife after a judge ruled he is a flight risk. He will remain jailed until his sentencing on a count of conspiracy to commit money laundering, and has agreed to cooperate with federal investigators.

Morgan, an aspiring rapper known as “Razzlekahn” and “The Crocodile of Wall Street,” was in court for her husband’s plea hearing.

Lichtenstein smiled at her and blew her a kiss during their moment of eye contact, the first time they had seen each other in more than a year. 

Lichtenstein and Morgan were charged in the case with attempting to launder more than 119,000 bitcoin stolen in the 2016 hack of the cryptocurrency exchange Bitfinex. The couple was not charged in the hack itself.

When the bitcoin was stolen, it was worth just $70 million.

But its value soared over the years, as about “25,000 of those stolen bitcoin were transferred out of Lichtenstein’s wallet via a complicated money laundering process that ended with some of the stolen funds being deposited into financial accounts controlled by Lichtenstein and Morgan,” the DOJ said when they were arrested.

At the time of their arrests, the DOJ said officials had seized more than 94,000 bitcoin of the hacked bitcoin, which at that time of the seizure was worth about $3.6 billion.

The Crypto Couple’s separate plea hearings were moved up from their originally scheduled times Thursday due to arraignment later in the afternoon in the same courthouse of Donald Trump. The former president was charged Thursday in that case with crimes related to an effort to overturn his 2020 election loss.

A charging document filed last month against the couple says that in early 2107 Lichtenstein “began to move a portion of the bitcoin” stolen in the hack “in a series of small, complex transactions across multiple accounts and platforms.”

This shuffling, which created a voluminous number of transactions, was designed to conceal
the path of the stolen funds,” according to that filing by the U.S. Attorney’s Office for the District of Columbia.

Prosecutors wrote that in February 2018, Lichtenstein and Morgan established an account at a U.S. financial institution for their company, Endpass, “and in doing so, represented to [that institution] that the primary payments into the account would be from software-as-a-service customer payments.”

“In actuality, Lichtenstein and Morgan used the account to launder proceeds of the
hack of” Bitfinex, the filing charges.

On the heels of their arrests last year, Netflix said it had commissioned a series on the couple.

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