Heather Morgan Faces Potential Jail Time in Bitfinex Bitcoin Laundering Case

TLDR

Federal prosecutors recommend 18-month jail sentence for Heather Morgan (“Razzlekhan”) for her role in laundering stolen Bitfinex Bitcoin
Morgan provided “substantial assistance” to the government, leading to a plea bargain
She pled guilty to money laundering and fraud charges in August 2023
Her husband, Ilya Lichtenstein, admitted to being behind the 2016 Bitfinex hack
Prosecutors seek return of seized crypto assets worth over $6 billion as restitution to Bitfinex

Federal prosecutors have recommended an 18-month jail sentence for Heather Morgan, known by her rapper persona “Razzlekhan,” for her involvement in laundering Bitcoin stolen from the Bitfinex cryptocurrency exchange in 2016.

This development comes as part of the ongoing legal proceedings surrounding one of the largest cryptocurrency heists in history.

Morgan, along with her husband Ilya Lichtenstein, was arrested in February 2022 in connection with the laundering of approximately 120,000 Bitcoin, valued at about $7.2 billion at current prices.

The couple’s case has attracted significant attention due to the scale of the theft and Morgan’s colorful online presence as a rapper and social media personality.

In a court filing on October 9, 2023, prosecutors argued for a relatively lenient sentence for Morgan, citing her “substantial assistance” to the government as part of a plea bargain reached in July 2023.

The filing also noted that Morgan was a “lower-level participant” compared to her husband and had only spent a small portion of the stolen funds.

Morgan entered a guilty plea in August 2023 to charges of money laundering and fraud. These charges carry a maximum combined sentence of 10 years in prison.

However, the prosecution’s recommendation of 18 months reflects her cooperation and lesser role in the crime.

The case took an unexpected turn when Lichtenstein admitted to being the perpetrator of the actual 2016 Bitfinex hack, in addition to his role in laundering the proceeds.

He pled guilty to one count of conspiracy to commit money laundering and faces a maximum sentence of 20 years in prison.

According to the prosecutors, Morgan was initially unaware of how Lichtenstein obtained the Bitcoin. It wasn’t until early 2020 that he revealed to her his responsibility for the hack.

After learning this information, Morgan aided him in laundering the funds and conspired to conceal his involvement.

The prosecutors’ filing stated, “It was not a momentary lapse or impulsive decision: The defendant consciously participated in the money laundering conspiracy and conspiracy to defraud over the course of years.”

They detailed how the couple used various technologically sophisticated methods to launder the stolen Bitcoin, including non-compliant crypto exchanges, darknet markets, and crypto mixers to obscure the trail of funds.

In an intriguing detail revealed by the prosecution, Morgan used some of the stolen funds to purchase physical gold coins, which she buried at a secret location. This location has since been disclosed to the authorities.

As part of their sentencing recommendation, prosecutors have requested that the court order Morgan to return the crypto assets seized by the government from the “Bitfinex Hack Wallet” as restitution to the exchange.

This wallet contains approximately 95,000 Bitcoin, 117,400 Bitcoin Cash, 117,400 Bitcoin Satoshi Vision, and 118,100 Bitcoin Gold, with a total value exceeding $6 billion.

The sentencing hearings for both Morgan and Lichtenstein are scheduled for mid-November, with Lichtenstein’s hearing set for November 14 and Morgan’s for November 15.

These proceedings will mark a significant milestone in the resolution of this high-profile cryptocurrency crime case.