The BroadsheetDAILY – 09/02/22 – FiDi couple arrested for laundering billions
A married couple living in the Financial District were arrested by FBI agents on Tuesday morning and charged with conspiracy to launder billions of dollars in stolen cryptocurrency. Ilya Lichtenstein and his wife, Heather Morgan, were arrested at their home at 75 Wall Street, according to federal prosecutors.
Mr Lichtenstein and Ms Morgan are said to have been in possession, via various online accounts, of 94,000 bitcoins, the virtual currency, which were stolen by hackers from a digital exchange, Bitfinex, in 2016. The current value of this amount bitcoin is worth more than $3.6 billion.
Although the couple are not currently charged with participating in the 2016 theft, federal agents tracking the proceeds of the Bitfinex theft followed a digital trail that led to accounts controlled by Mr. Lichtenstein and Ms. Morgan.
Armed with search warrants and court orders, investigators accessed those accounts and seized the proceeds at the same time they took the couple into custody. This is the Justice Department’s largest ever seizure of not just cryptocurrency, but any asset class, including narcotics, real estate, and traditional currencies.
Ms Morgan describes herself on a social media site as the co-founder and CEO of a company that uses “artificial intelligence to automate identity verification while proactively detecting fraud”. She also claims to be an expert in “reverse engineering black markets to think of better ways to fight fraud and cybercrime”.
It appears that Ms. Morgan and Mr. Lichtenstein teamed up to launch a tech company named Endpass sometime after Bitfinex was stolen. They describe the company in online posts as “a blockchain startup solving decentralized identity and authentication problems.”
The criminal complaint filed by federal prosecutors on Tuesday alleges that the couple “employed numerous sophisticated laundering techniques, including the use of fictitious identities to create online accounts; using computer programs to automate transactions, a laundering technique that allows many transactions to take place in a short period of time; deposit the stolen funds into accounts at various virtual money changers and darknet markets and then withdraw the funds, which obscures the trail of transaction history by interrupting the flow of funds. Investigators also accuse Mr. Lichtenstein and Ms. Morgan of converting the stolen bitcoin into other virtual currencies, including “anonymity-enhanced virtual currency,” a form of digital cash that appears specifically designed to conceal the ownership and movement of funds.
Mr. Lichtenstein and Ms. Morgan are charged with conspiracy to launder money and “conspiracy to defraud the United States” – a broad class of offenses that includes defrauding the government of property or money, or using deception to interfere with any of his lawful duties. The first count carries a maximum sentence of 20 years in prison, while the second carries a sentence of up to five years in prison.