How rapper dubbed ‘Crocodile of Wall Street’ and her husband were behind £3.5b crypto heist
£3,500,000,000. That’s a lot of zeros… And a lot of money.
Rapper Heather Morgan, 32, and her tech entrepreneur husband Ilya ‘Dutch’ Lichtenstein, 34, tried to steal the entire lot.
This wasn’t your typical cash theft, though. Instead, the couple attempted to land themselves the fortune through a Bitcoin hack.
The pair were on the brink of living a lavish lifestyle safe from arrest if they had managed to pull off the most lucrative heist in US history.
But they made one crucial mistake – using their cryptocurrency to buy a supermarket voucher.
Morgan – who calls herself the ‘Crocodile of Wall Street’ – and Lichtenstein had been getting away with it for around six years by distributing their fortune in all manner of creative ways.
That was until February last year when they were arrested on suspicion of laundering huge sums of money in Bitcoin after the Bitfinex exchange was hacked in 2016.
At the time, their stash of 119,000 Bitcoins was worth about $4.5bn (£3.5bn), which makes it the US Department of Justice’s largest single financial seizure in the nation’s history.
Lichtenstein, who is a dual citizen of the USA and Russia, admitted he was behind the hack as part of a plea deal, the BBC reports.
Both he and his wife pleaded guilty to money laundering and Morgan also admitted to an additional charge of conspiracy to defraud the United States.
Now they are both likely to be locked up for decades. Lichtenstein faces a 20-year prison sentence, while Morgan could be jailed for up to 10 years.
Morgan and Lichtenstein’s audacious ruse
After Lichtenstein hacked the system in 2016 and landed himself £3.5bn in Bitcoin, the couple started to launder their riches.
As part of their ploy to go under the radar, Morgan started masquerading as a rapper and tech entrepreneur.
Even though it was a scheme to cover up her crimes, Morgan brazenly labelled herself a ‘bad-ass money maker’ and ‘The Crocodile of Wall Street’ in her song lyrics.
She also filmed dozens of expletive-laden music videos and rap tunes around New York under the name Razzlekhan – and boasted on her website that she was ‘more fearless and more shameless than ever before’.
In articles published in Forbes, Morgan also called herself an ‘economist and software investor’ as part of her elaborate claims of being a successful tech businesswoman.
While her make-believe lifestyle was playing out on social media, Morgan and her computer programmer husband were working on ways to extract their Bitcoin into traditional money.
Using sophisticated techniques, the couple chased out millions of dollars of the Bitfinex Bitcoins into cash and court documents showed in detail how they managed to go about their business.
Their methods included:
- Splitting up the Bitcoin into tiny amounts and transferring it to thousands of different crypto wallets with fake identities
- Mixing their stolen funds with other criminal cryptocurrency on the darknet marketplace Alphabay
- Purchasing gold coins
- Setting up shell companies to make the Bitcoin funds look legitimate
How Morgan and Lichtenstein were caught
Their demise ultimately came when they decided to buy their shopping with Walmart supermarket vouchers that had been paid for with the stolen funds.
‘Police were able to link the Walmart gift cards back to some of the proceeds of the Bitfinex hack, which then opened up the further investigation,’ said Jonathan Levin, founder of cryptocurrency investigators Chainalysis which was involved in the investigation.
‘Buying gift cards and moving between different exchanges and different cryptocurrency never actually created this sort of break in provenance that the couple intended.’
Bitfinex said in a written statement: ‘Bitfinex will work with the DOJ and follow appropriate legal processes to establish our rights to a return of the stolen bitcoin.’
When cops raided the couple’s home in Manhattan, they found hollowed-out books that had been created to hide mobile phones.
They also found around £31,000 ($40k) in cash, dozens of burner handsets and several USB sticks.
Police were also able to successfully decrypt a spreadsheet that meticulously detailed the couple’s intricate methods for laundering the money, which allowed nearly the full amount to be recovered.
The successful operation is the most recent case to utilise tools able to analyse transactions on Bitcoin’s public blockchain ledger.
Plans to flee to Russia to be free from arrest by the US
When Morgan and Lichtenstein’s communication records were uncovered, prosecutors say they indicated that the couple were planning to flee the US for Russia, where he was born.
According to the BBC, if successful, they would likely have continued to live out a luxury billionaire lifestyle, safe from arrest by the US.
Lichtenstein described himself in online profiles as an ‘angel investor’ and had got engaged to Morgan in 2019, according to their Facebook posts.
Earlier this year, £22,000,000 bitcoin scammers made so much money they handed it out in the street.
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