‘Bitcoin Bonnie and Clyde’ Plead Guilty to Billion Dollar Crypto Laundering Scheme

‘Bitcoin Bonnie and Clyde’ Plead Guilty to Billion Dollar Crypto Laundering Scheme

On Thursday, Heather Morgan, a.k.a. Razzlekhan, and her husband pleaded guilty to orchestrating a massive money laundering scheme. Morgan and Ilya Lichtenstein became known as the modern-day “Bitcoin Bonnie and Clyde” after they were linked to the 2016 theft of $US4.5 billion in crypto from the Hong Kong-based exchange Bitfinex.

The FBI cornered and arrested the pair for the heist in 2022 and through a search warrant, was able to recover the majority of the money in what the Justice Department called its “largest financial seizure ever.”

Prior to their plea deal, Morgan and Lichtenstein had not been formally implicated in the crypto theft.

Following her arrest in 2022, Morgan became a bit of a viral sensation due to her ludicrous rap persona Razzlekhan, calling herself a “bad-*ss money maker” and “the crocodile of Wall Street.” She claimed in her Twitter bio that she is an “economist, serial entrepreneur, software investor, and rapper.”

While promoting her crypto-rap career, Morgan and Lichtenstein were conducting an elaborate plan to launder Bitfinex bitcoins. The couple split the Bitcoin into small amounts and then transferred it to thousands of crypto wallets using fake identities. They purchased gold coins, mixed the stolen funds with outside criminal cryptocurrency on Alphabay, a darknet marketplace, and created shell companies to make their stolen Bitcoin look legitimate.

The Justice Department says Lichtenstein “used a number of advanced hacking tools and techniques to gain access to Bitfinex’s network,” allowing him to authorize more than 2,000 fraudulent transactions and transfer 120,000 bitcoin to a controlled cryptocurrency wallet, according to a DOJ press release. After Lichtenstein hacked Bitfinex, he deleted access credentials and any other log files that could have revealed his identity to authorities and then enlisted Morgan to launder the stolen funds, the press release said.

However, Morgan and Lichtenstein’s undoing came when they used the stolen Bitcoin to purchase Walmart vouchers, creating a trail that authorities were able to trace back to the couple’s Manhattan apartment. “Police were able to link the Walmart gift cards back to some of the proceeds of the Bitfinex hack, which then opened up further investigation,” Jonathan Levin, founder of cryptocurrency investigators Chainalysis which was involved in the investigation, told the BBC.

“Buying gift cards and moving between different exchanges and different cryptocurrency never actually created this sort of break in provenance that the couple intended,” he said.

When police raided their apartment, investigators recovered stolen funds valued at roughly $US3.6 billion, $US40,000 in cash, dozens of burner phones hidden in hollowed-out books, and a spreadsheet that they decrypted to reveal their planned methods for laundering the money. Prosecutors claimed that according to Morgan and Lichtenstein’s communication records, they were planning to flee to Ukraine or Russia—Lichtenstein’s home country, according to court documents viewed by Gizmodo.

US District Judge Colleen Kollar-Kotelly accepted the couple’s guilty plea, and Lichtenstein is currently being held in jail while he awaits sentencing. He pleaded guilty to conspiracy to commit money laundering, carrying a maximum penalty of 20 years in prison, the DOJ said in the press release.

Morgan pleaded guilty to one count of money laundering and one count of conspiracy to defraud the U.S. and remains under house arrest while waiting for her sentencing. Each count carries a penalty of up to five years in prison.

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