Five crazy details from Razzlekhan and Dutch’s alleged $5.3 billion Bitfinex crime
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Criminal masterminds, they were not.
In the overnight hours the US Department of Justice confirmed what blockchain sleuths suspected last week – that it had recovered US$3.6 billion worth of Bitcoin from the infamous 2016 hack of Bitfinex, as well as arresting a husband and wife accused of laundering the funds.
Ilya “Dutch” Lichtenstein, 34, and Heather R Morgan, 31, haven’t been accused of stealing the 119,754 Bitcoins from Bitfinex in August 2016. At the time, that much BTC was worth US$71 million – now it’s worth US$5.3 billlion. But the government alleges that Lichtenstein, a dual Russian-US national, had control of the Bitcoin since about the time of the hack.
Here are some of the craziest details of the case:
If you’re unfamiliar with crypto, it’s hard to articulate just how dumb this is. A cloud storage account might be secure enough for a few thousand dollars worth of crypto – but billions?
The feds were able to access the account via a search warrant last year, and decrypted the files around 31 January 2022.
Lichtenstein has a smaller internet footprint than his wife, who is extremely online. But his Medium account bio describes him as a “tech entrepreneur, explorer, and occasional magician”.
Morgan on the other hand had an alter ego called “Razzlekhan” and posted horrible rap videos to her YouTube account.
From 2017 to 2021, she was a contributor to Forbes, penning articles like “These Economics Lessons Could Save You From Making Terrible Business and Life Decisions” and “Experts Share Tips To Protect Your Business From Cybercriminals“.
The DOJ’s 20-page affidavit says that agents tracked Bitcoin from wallet 1CGa4s, which contained most of the stolen funds, to the Alpha Bay dark website and numerous interconnected accounts at 10 different crypto exchanges.
Agents were tracking a BTC wallet that on May 3, 2020, sent 0.057 BTC to a business that sells prepaid gift cards in exchange for Bitcoin.
The buyer purchased a $500 gift card from Walmart, as well as gift certificates for Uber, Hotels.com and Playstation, for a total of 16 purchases – none for very much money.
Portions of the $500 gift card was then redeemed for personal items via Walmart’s iPhone app, with the transactions conducted under Morgan’s name and email address and using their home address for delivery.
The pair appeared before US Judge Debra C Freeman in US District Court for the Southern District of New York on Tuesday afternoon.
According to Inner City Press, which live-tweeted the hearing, Judge Freeman set $5 million bail for Lichtenstein and $3 million bail for Morgan, over the objections of prosecutors who wanted them held without bond because they were a flight risk.
Authorities argued that $330 million in Bitcoin had yet to be found; that they had 50 different electronic devices in a bag labelled “burner phones” and that Lichtenstein had files in his computer files called “Persona” and “Passport_Ideas”.
But Judge Freeman was swayed by the fact that they had been aware of the investigation since November, when their service provider told them of the warrant, and had not fled.
It’ll take time for the arrangements to be made – Morgan’s family will have to put up their house – and prosecutors plan to appeal.
The event took place July 23, 2019, at the Williamsburg Hotel Library Bar in Brooklyn.
“Social engineering is the act of manipulating someone into divulging information or taking a particular action. While it often has a negative connotation in cybersecurity, there are many less sinister instances where you can use it to improve your life — from dating and job hunting to journalism, sales, and entrepreneurship,” the event’s description reads.
“Hear firsthand how Heather R Morgan social engineered her way into exclusive parties and expensive political fundraisers, infiltrated black markets around the world, and built relationships with celebrities and billionaire CEOs…”
“Did not expect 200+ people to register, but excited to share my thoughts, experience and advice on social engineering: from sales to infiltrating black markets,” she wrote on Facebook at the time.