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Judge Separates Couple Accused Of Conspiring To Launder $4.5 Billion On Valentine's Day
Prosecutors had argued that Ilya Lichtenstein and Heather Morgan posed a significant flight risk and still had substantial amounts of cryptocurrency while making a plea to keep both behind bars.
A federal judge decided on Valentine’s Day to separate a couple accused of conspiring to launder $4.5 billion in cryptocurrency—sending one to jail and allowing the other to return home.
Chief Judge Beryl A. Howell made the decision to keep 34-year-old Ilya Lichtenstein behind bars, partially reversing an earlier decision by a New York judge to release the couple on bond, after prosecutors argued that Lichtenstein, a Russian national who promoted himself as a “tech entrepreneur,” was a significant flight risk and could still have access to significant financial means, according to CBS News.
His wife, Heather Morgan, 31, who is also a rapper known as Razzlekhan, was allowed to return home under supervision while awaiting trial.
The couple is accused of conspiring to launder the proceeds of 119,754 bitcoin stolen during the 2016 hack of the virtual currency exchange Binfinex, according to the Department of Justice. While the estimated value of the bitcoin was $72 million at the time of the theft, authorities said its value has increased to an estimated $4.5 billion today.
Authorities have not accused the couple of stealing the bitcoin, but the allegations against them center around laundering the bitcoin to erase the digital trail.
The couple was arrested last week after special agents seized and recovered more than 94,000 bitcoin from the couple, valued at more than $3.6 billion at the time of seizure, in what authorities have called the “largest financial seizure ever.”
After their arrest, a federal magistrate judge in New York initially set a $5 million bond for Lichtenstein and a $3 million bond for Morgan, but prosecutors asked Howell to reverse the decision after concerns emerged about the couple’s ability to flee the country.
Authorities allege that despite the government’s seizure of $3.6 billion in bitcoin, the couple still has access to more than $320 million in unsecured cryptocurrency which they could use to establish new lives outside the United States, according to court documents obtained by Law & Crime.
Prosecutors also pointed an apparent connection to “darknet” websites that could allow the couple to produce fake identities and documents. They further alleged that they had already taken “meaningful steps” to open financial accounts in Ukraine and Russia, according to the documents also obtained by CBS News.
However, while prosecutors argued that the couple had a “strong incentive to flee” the country, their attorney Samson Enzer disputed that assertion. Enzer argued that the couple each had strong family connections to the United States, noting that both of their parents had offered their houses as collateral for the bond.
Enzer also pointed the couple’s decision to freeze embryos at a New York hospital in the hopes of conceiving a child.
“They would literally be leaving their future behind if they left,” Enzer said, according to Law & Crime.
He also pointed out that the couple had remained in the United States after law enforcement officials had served a search warrant at their home in January.
Assistant U.S. Attorney Catherine Pelker argued, however, that the couple had likely remained in the United States because they believed they had “succeeded in outsmarting us” and believed they had been able to launder the money covertly enough that they could have “plausible deniability” even if investigators did find it.
She also shot down the defense’s argument that the couple’s parents’ decision to offer up their homes as collateral would ensure they didn’t flee before the trial.
Pelkner said that while she “doesn’t doubt the sincerity” of their parents, there is still enough cryptocurrency unaccounted for that they could “buy each of their parents a private island.”
Pelker also refuted the claims the couple’s fertility plans ensured that they’d remain in the United States, noting that it was “incredibly difficult to have and raise children if you’re in jail for 20 to 25 years.”
Although Howell conceded the evidence was “very strong” in the case, she agreed to let Morgan remain out on bond—with the use of a GPS monitoring device to track her movements—while Lichtenstein would stay behind bars.
Lichtenstein and Morgan are accused of employing “numerous sophisticated laundering techniques” to move the stolen bitcoin to currency exchanges and banking accounts in an attempt to erase their trail, according to the Department of Justice, which alleged the couple had initiated more than “2,000 unauthorized transactions” to send the stolen bitcoin to a digital wallet controlled by Lichtenstein.
Their defense attorneys called the state’s case “flimsy” and argued that the criminal complaint contained “many deficiencies.”
