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The eccentric couple charged with laundering billions of dollars’ worth of hacked bitcoin used tricks that were “pulled from the pages of a spy novel” – with financial accounts in Russia and Ukraine, fake identities and a “contingency plan” to flee overseas, the feds said in court documents.
Prosecutors warned Ilya “Dutch” Lichtenstein, 34, and his amateur rapper girlfriend Heather Morgan, 31 – who are charged with laundering $4.5 billion in crypto stolen in a 2016 hack – should remain in custody until their trial given “highly troubling” access to hundreds of millions of dollars in cryptocurrency, overseas connections and fake identities.
“Having now been charged and seeing the strength of the case, the defendants’ incentive to flee is dramatically increased,” the prosecutors said. “In short, no condition or combination of conditions can reliably ensure the appearance of such sophisticated defendants with the means to flee and ample incentive to do so.”
The feds allege that Lichtenstein and Morgan have “access to numerous fraudulent identities and documents purchased on the darknet, and the ability to easily acquire more.” The documents noted that the couple appeared to “have been setting up a contingency plan for a life in Ukraine and/or Russia prior to the COVID-19 pandemic.”
The documents also contained details on a federal raid of the couple’s New York apartment in January, during which Morgan attempted to lock her phone while pretending to retrieve her cat and authorities “had to wrest” the device from her hands.
“Morgan also appeared to be attempting to interfere with law enforcement’s search of the defendants’ residence by grabbing for and attempting to lock her phone under the pretense of retrieving her cat,” the documents said.
During the raid, agents found a multiple phones and SIM cards, including a bag labeled “burner phone.” In total, the feds found more than 50 electronic devices on site.
Additionally, prosecutors said authorities found “two hollowed-out books” in Lichtenstein’s office, as well as more than $40,000 in cash and “what appears to be a substantial amount of foreign currency.”
Prosecutors noted that Lichtenstein used virtual currency to buy “over 70 one-ounce gold coins,” through a precious metals dealer, but law enforcement didn’t find a “single gold coin” during their raids on the couple’s apartment and storage unit.
The filing also poked fun at the couple, noting “bluster” in their request for bail and disputing what prosecutors described as an attempt by the defense to “portray defendant Morgan as an unwitting bystander” despite her “integral role” in the scheme.”
In a section labeled “suspicious Ukraine activity,” prosecutors said the defendants took a month-long trip to Ukraine in 2019. Files on Lichtenstein’s cloud storage account contained tracking numbers suggesting shipments arrived in the country while they were there and a document written in Russian on “how to anonymously receive a parcel in Ukraine.”
The cloud account had a folder titled “personas,” with subfolders titled “RU” for Russia and UA” for Ukraine. The folders purportedly contained ID documentation for “numerous individuals,” both male and female.”
Morgan and Lichtenstein are accused of conspiring to launder 119,754 bitcoin they pilfered when a hacker breached crypto exchange Bitfinex in 2016. They face 25 years in prison.
A self-described entrepreneur, Morgan also rapped under the name “Razzlekhan” and dubbed herself the “Crocodile of Wall Street. She once penned a Forbes column in which she warned of “Cybercriminals and fraudsters” taking advantage of the COVID-19 pandemic.
Morgan and Lichtenstein purportedly spent the proceeds from their laundering scheme on a various purchases, including $500 Walmart gift card, the aforementioned gold coins and NFTs, according to the criminal complaint.
The Justice Department said it has captured $3.6 billion in cryptocurrency from the Bitfinex hack in its “largest financial seizure ever.”
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