A New York computer expert and technology entrepreneur was sentenced on Nov. 14 to five years in prison after pleading guilty last year to stealing nearly 120,000 bitcoin and laundering it for years with the help of his wife.
Ilya Lichtenstein, a 35-year-old U.S. citizen who was born in Russia, hacked into Hong Kong-based Bitfinex’s network in 2016, using “advanced hacking tools and techniques” and stole about 119,754 bitcoin, according to court documents cited by the Department of Justice (DOJ).
The bitcoin was worth $71 million at the time of the hack, according to prosecutors. They said the incident marked one of the largest-ever thefts from a virtual currency exchange in history.
Following the hack, Lichtenstein tried to cover his tracks by deleting access credentials and other log files from Bitfinex’s network, the DOJ said.
He then enlisted the help of his wife, Heather Rhiannon Morgan—a business owner and writer who went by the name “Razzlekhan” to promote her rap music—in laundering the stolen funds, according to the department.
The DOJ said Lichtenstein, at times with his wife’s assistance, employed “numerous sophisticated laundering techniques,” to move the stolen bitcoin to avoid the attention of law enforcement officials.
This included using fake identities to set up online accounts; utilizing computer programs to automate transactions; depositing the stolen funds into accounts at various darknet markets and cryptocurrency exchanges and then withdrawing the funds; and converting bitcoin to other forms of cryptocurrency, also known as “chain hopping.”
He also deposited some of the stolen bitcoin into cryptocurrency mixing services; designed to obscure the transaction trail by mixing the bitcoin with other users’ bitcoin, and used U.S.-based business accounts to legitimize his banking activity. Lichtenstein also converted a portion of the stolen funds into gold coins, the DOJ said.
Barry Berke, an attorney for Bitfinex said the hack “devastated” the exchange’s finances and its reputation, with the stolen funds accounting for approximately 36% of the company’s assets at the time of theft.
U.S. District Judge Colleen Kollar-Kotelly told Lichtenstein on Thursday that his theft was “meticulously planned” and not an impulsive act.
“It’s important to send a message that you can’t commit these crimes with impunity, that there are consequences to them,” she said.
Lichtenstein, who gets credit for the two years and nine months he has already spent in jail since his February 2022 arrest, expressed remorse for his actions during sentencing, telling the judge he regrets “wasting my talents on crime instead of a positive contribution to society.”
He said he hopes that he can apply his expertise to fight cybercrime after completing his prison sentence.
Defense attorney Samson Enzer said that over 96 percent of the stolen funds have been recovered with Lichtenstein’s help. The “vast bulk” of the stolen money was never spent, he said.
“This is not an evil person,” Enzer said. “This is a good person who made some very bad mistakes.”
Lichtenstein and Morgan both pleaded guilty to one count of conspiracy to commit money laundering on Aug. 3, 2023. Morgan is scheduled to be sentenced on Nov. 18.
