Tech
Razzlekhan and her husband guilty of laundering $4.5 billion in Bitcoin
- By Joe Tidy
- Cyber correspondent
August 3, 2023
Image caption, Heather Morgan has been releasing high-production rap music videos under the moniker Razzlekhan
A husband-and-wife team of cyber criminals have pleaded guilty to trying to launder $4.5 billion (£3.5 billion) of Bitcoin they stole in a cyberattack in 2016.
Heather Morgan and Ilya Lichtenstein were arrested last year in New York after police traced their wealth to cryptocurrency theft.
While evading police, Morgan disguised himself as a rapper and tech entrepreneur.
As part of the plea agreement, Lichtenstein admitted that he was behind the hacking.
The pair pleaded guilty to money laundering, but Morgan pleaded guilty to an additional count of conspiracy to defraud the United States.
Despite attempting to hide his crimes, Morgan released dozens of expletive-filled music videos and rap songs filmed in locations around New York, under the name Razzlekhan.
In her lyrics she called herself a “badass money maker” and “the crocodile of Wall Street.”
Image caption, Ilya Lichtenstein kept meticulous records of how the pair were laundering the stolen Bitcoin
In articles published in Forbes, Morgan also claimed to be a successful tech businesswoman, calling herself an “economist, serial entrepreneur, software investor and rapper.”
But as she developed her rapper and tech persona, she and her computer programmer husband were attempting to cash in on the fortune stolen from the cryptocurrency company Bitfinex.
The pair now face prison sentences with Lichtenstein facing a maximum of 20 years in prison and Morgan a maximum of 10.
At the moment of their arrest in February 2022, the stash of 119,000 Bitcoins was worth approximately $4.5 billion, making it the largest financial seizure in its history by the US Department of Justice.
At the time of the hack, Bitcoins were worth approximately $71 million.
Image caption, Heather Morgan was a regular contributor to Forbes magazine as a tech entrepreneur
Court documents detailed how the pair cashed out millions of dollars worth of Bitfinex Bitcoin into fiat money using sophisticated techniques to try to stay under the radar.
- Divide Bitcoins into small amounts and transfer them to thousands of different crypto wallets with fake identities
- They mixed the stolen funds with other criminal cryptocurrencies on the Alphabay darknet marketplace
- Purchased gold coins
- Create shell companies to make Bitcoin funds appear legitimate
The successful police operation is the latest case in which tools capable of analyzing transactions on the public ledger of the Bitcoin blockchain are used.
One of the couple’s major mistakes was making purchases with Walmart supermarket coupons paid for with the stolen funds.
Image source, US Department of Justice
Image caption: Police used advanced techniques to trace stolen Bitcoins in public transaction records
“The police were able to link the Walmart gift cards to some of the proceeds from the Bitfinex hack, which then opened up further investigation,” said Jonathan Levin, founder of cryptocurrency sleuths Chainalysis who was involved in the investigation.
“Buying gift cards and moving between different exchanges and different cryptocurrencies never created this sort of disruption in provenance that the couple intended,” he said.
When police raided the couple’s Manhattan apartment, they found hollowed-out books created to hide cell phones.
They also discovered dozens of burned phones, several USB sticks and $40,000 in cash.
Image source, US Department of Justice
Image caption, Police say the couple tried to hide prepaid phones in their apartment
Police were able to successfully decipher a spreadsheet that meticulously detailed the couple’s intricate methods of laundering the stash, allowing them to recover almost the entire amount.
In court documents, prosecutors say they discovered communication documents indicating that Morgan and Lichtenstein were planning to flee the United States for Russia, his country of birth.
If successful, they would likely live a billionaire lifestyle, safe from arrest by the United States.
When the hack occurred, Bitfinex customers took a forced “haircut”, losing 36% of their assets held by the cryptocurrency exchange. In 2019, the company had reimbursed the victims, so now the Hong Kong-based company and some customers who exchanged their losses for shares are waiting to receive a windfall once the recovered Bitcoins are returned.