Prosecutors said Ilya “Dutch” Lichtenstein, 34, and his wife, Heather Morgan, 31, New Yorkers, who were arrested Tuesday morning in Manhattan, stole items ranging from gold and non-fungible tokens to $500 Walmart gift cards. Illegal proceeds were spent, prosecutors said. ,
The couple had active public profiles, with Morgan known as rap singer “Razlekhan”, a pseudonym he referred to Genghis Khan on his website “but with more pizzazz.”
It was the Justice Department’s largest financial seizure, deputy attorney general Lisa Monaco said in a statement, indicating that cryptocurrency is “not a safe haven for criminals.”
Lichtenstein and Morgan are charged with conspiracy to commit money laundering as well as defrauding the United States. The case was filed in a federal court in Washington, DC.
In her initial appearance in federal court in Manhattan Tuesday afternoon, U.S. Magistrate Judge Debra Freeman set a $5 million bond for Lichtenstein and $3 million for Morgan, and demanded that their parents pay their taxes for their return to court. Post homes as security.
The pair are accused of conspiracy to steal 119,754 bitcoins after a hacker broke into Bitfinex and initiated more than 2,000 unauthorized transactions. Justice Department officials said the value of transactions in bitcoin at the time was $71 million, but with the increase in the value of the currency, the value is now more than $4.5 billion.
An important clue may have come from the 2017 bust of an underground digital market that is used to launder a portion of the funds. US officials said some of the money had been transferred to Alphabay, a version of eBay hosted on the dark web.
When the site was taken down, according to digital currency tracking company Elliptic, it allowed authorities to access Alphabay’s internal transaction logs and link it to a cryptocurrency account in Lichtenstein’s name.
Bitfinex said in a statement that it is working with the Justice Department to “establish our rights to return stolen bitcoins.”
“protect your business from cybercriminals”
The Justice Department said Lichtenstein and Morgan attempted to launder money through a network of currency exchanges or claimed the money represented payments to Morgan’s startup.
In addition to his rap singer profile, Morgan has edged into the worlds of painting, fashion design, and writing, where he introduced himself as a corporate coach of sorts. One of her recent pieces was titled, “Tips to Protect Your Business from Cybercriminals” and featured an interview with a cryptocurrency exchange owner about how to prevent fraud.
Morgan, wearing a white hoodie to her court, often looked up to her parents, who were seated in the courtroom audience. Both he and Lichtenstein, who holds dual US-Russian citizenship, nodded as Freeman warned them of dire consequences if they tried to escape.
Freeman said they would both be placed under house arrest with electronic surveillance, and barred from engaging in cryptocurrency transactions. A judge in Washington, where further hearings will take place, may set different terms later, she said.
Prosecutors sought to take the two into custody before the trial, arguing that they took flight risks. But Freeman said she was impressed by defense lawyer Anirudh Bansal’s argument that both Lichtenstein and Morgan knew they had been under investigation since November and still remained in the United States.
Tuesday’s criminal complaint comes more than four months after Monaco’s announcement department was starting A new national cryptocurrency enforcement team, consisting of a mix of anti-money laundering and cybersecurity experts.
Cybercriminals who attack companies, municipalities, and individuals with ransomware often demand payment in cryptocurrencies.
In a high-profile example last year, former partners and associates of ransomware group caused widespread gas shortages on the US East Coast when it used encryption software called Darkside to launch cyberattacks on the Colonial Pipeline.
Justice Department later recovered Some $2.3 million in cryptocurrency ransoms that Colonial paid the hackers.
Cases like this show that the Justice Department can “follow money in the blockchain just as we’ve always followed it within the traditional financial system,” said Kenneth Polite, assistant attorney general for the department’s criminal division.
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