New York Cryptocouple Executed ‘Heist of the Century’

In June 2020, Heather Morgan wrote a column for Forbes titled “Expert Tips to Protect Your Business from Cybercriminals”. Now, US officials claim she was more of an expert than she appeared.

On Tuesday (8), the businesswoman and rising rapper was arrested, accused of trying to launder more than US$ 3.6 billion (R$ 19 billion) in stolen bitcoins along with her husband, Ilya Lichtenstein. The US government took control of that amount — the biggest financial seizure in the history of the Department of Justice.

The agency accused the now-detained couple of employing a “complex money laundering process” but did not attempt to link them to the actual theft, in a 20-page court case that chronicles the allegations against them.

Samson Enzer, the couple’s lawyer, argued in a document on Wednesday that there are “significant holes in the government’s case against them.”

“Its brilliant graphics fail to hide the various deficiencies in government evidence and conclusive jumps without support,” added Enzer, who did not respond to further requests for comment.
Since their arrest on charges of conspiring to commit money laundering and defrauding the United States, speculation has revolved around Morgan, 31, and Lichtenstein, 34, who have led a lively life online for more than five years while allegedly having a fortune in stolen cryptocurrency.
In 2016, unidentified thieves took 19,754 bitcoins, nearly 1% of the cryptocurrency then in circulation. Since then, its value has jumped from US$ 71 million to more than US$ 4.5 billion (R$ 23.6 billion).

The Justice Department alleges that the couple converted about $2.9 million worth of bitcoins into fiat currency. But officials said that more than 80% of the stolen cryptocurrencies remained untouched in accounts associated with Morgan and Lichtenstein, who describes himself as a tech entrepreneur.

The specific allegations of money laundering made by the government involve relatively small amounts, including the purchase of a $500 gift card from Walmart. The couple also reportedly bought gift cards from Uber, Hotels.com and PlayStation.

The size of the robbery would have been problematic for whoever planned it.

“If they had stolen 500 bitcoins, no one would bother trying to find them, but this was the heist of the century,” said Frank Weert, co-founder of Whale Alert, a blockchain tracking and analytics company. “It would be incredibly stupid to steal so much bitcoin.”

Heather Morgan is a self-proclaimed “serial entrepreneur, [em software] and surrealist artist/rapper.” In addition to her regular columns for Forbes, she has also written for Inc magazine on topics ranging from leadership skills to “snake handling techniques to help you deal with stress.”

Her Forbes author biography said, “When she’s not reverse engineering the black market to think of better ways to fight fraud and cybercrime, she enjoys rapping and designing streetwear fashion.”

A rising rap artist, Morgan’s alter ego rapper Razzlekhan, dressed in lamé, sang on YouTube about the US healthcare system, entrepreneurship and a gynecological disease called endometriosis. She described herself as having a “hacker mentality” and said that “following rules blindly is for fools”.

Lichtenstein was a devoted fan of hers. His marriage proposal to Morgan in 2019 involved the purchase of several Razzlekhan billboards in Times Square in New York. Lichtenstein wrote on Facebook that his fiancée’s rapper persona was “surreal, mysterious, scary and sexy… horrifying enough to draw attention and compelling enough that you can’t look away.”

The money laundering allegations focus on Lichtenstein, who has dual US and Russian citizenship, although he has led a more moderate life on the internet. “Her rap is overshadowing his record,” said Nicholas Weaver, a professor in the school of computer science at the University of California at Berkeley.

Lichtenstein founded a company called EndPass in 2018, which has been described as “a blockchain startup that solves problems of identity and decentralized authentication”. More recently, he ran an angel investment firm called Demandpath, according to his LinkedIn profile.
In photos on social media, their Manhattan apartment, which they appear to rent, was filled with cat toys, equipment for working from home and gym equipment. The couple have a Bengal cat named Clarissa, who they walk on a leash. Morgan worked and made YouTube videos about entrepreneurship, juices and prosthetic eyeballs at a small table decorated with collages of postcards and coins from Kazakhstan and Vietnam.

Their lawyer argued in court documents asking for bail that they were not at risk of flight because their frozen embryos were in a New York hospital. “The couple would never flee the country at the risk of losing access to their ability to have children, which they were planning this year until their lives were cut short by their arrests,” Enzer wrote.

He also said the couple had known they had been under investigation since November and had deferred to authorities since the Justice Department searched their apartment on Jan. 5, seizing travel documents and computers.

The department claims those searches were fruitful — and “colorful.” He claims that codes for the missing bitcoins were found in a file on Lichtenstein’s cloud account, which “contained a list of 2,000 virtual currency addresses… almost all directly linked to the hack”. An electronic document, labeled “passport ideas,” included links to darknet providers that the court said appeared to be selling false identification. Another contained the name of a Russian bank that one member of the couple dubbed the “Russian oligarch bank draft”. Lichtenstein’s cloud account allegedly contained a folder called “personas” with false identification documents.

“Being smart doesn’t stop you from being stupid,” said David Gerard, author of “Attack of the 50-foot Blockchain.” He said that bitcoin was more difficult to launder than other cryptocurrencies because it is more easily tracked on the blockchain.

The Justice Department claims the couple sometimes used their real names and addresses when creating accounts on regulated exchanges, which were later used to buy gold with bitcoin. Weaver said that in an investigation of this nature “a mistake becomes the breadcrumb that can be followed”.
On his website, Razzlekhan, who called himself the “Crocodile of Wall Street,” wrote that he was always pushing the limits of the possible. “Whether this leads to something wonderful or terrible is unclear; the only certainty is that it will not be boring or mediocre.”

Translated by Luiz Roberto M. Gonçalves