The hipster duo accused of laundering billions of dollars in stolen cryptocurrency were at one point considering starting a new life in Eastern Europe and even had “a brief conversation with each other in Russian” when they were arrested on Feb. 8, federal prosecutors said Thursday in a court filing arguing against releasing the pair on bond.
Bolstering their claim, the filing says FBI agents discovered a multitude of suspicious items in the couple’s Wall Street apartment, including books with secret compartments made by hollowing out the pages.
But defense lawyers for self-described “Crocodile of Wall Street” Heather Morgan, 31, and Ilya “Dutch” Lichtenstein, 34, insist they won’t become fugitives, filing their own brief that says the two are eager to become parents and want to maintain access to “several” embryos they “previously froze at a hospital in New York in anticipation of starting a family together.”
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Morgan, a tech entrepreneur, erstwhile Forbes contributor, and aspiring rapper under the moniker “Razzlekhan,” and Lichtenstein, who also has a background in tech, are charged with laundering some $4.5 billion worth of Bitcoin pilfered in a 2016 hack. Court documents lay out a sophisticated scheme in which Morgan and Lichtenstein allegedly attempted to launder the funds through countless convoluted transactions between various pseudonymous accounts. Still, a years-long investigation by special agents with the IRS, FBI, and the Department of Homeland Security was able to trace the money flow directly to the newlyweds, who were able to cash out about $2.9 million of the illicit Bitcoin before getting caught, prosecutors say.
Investigators still have not been able to access at least 24 accounts allegedly controlled by Morgan and Lichtenstein, containing about 7,500 Bitcoin, worth roughly $328 million, according to the government.
In a letter to Chief Judge Beryl Howell of Washington, D.C., District Court, defense attorney Samson Enzer said Morgan, 31, “can only conceive through in vitro fertilization because she suffers from endometriosis. The couple would never flee from the country at the risk of losing access to their ability to have children, which they were discussing having this year until their lives were disrupted by their arrests in this case.”
However, prosecutors contend that “no condition or combination of conditions can reliably ensure the appearance of such sophisticated defendants with the means to flee and ample incentive to do so.”
“The defendants are believed to have significant additional assets, including the remaining hundreds of millions of dollars’ worth of virtual currency stolen in the hack that has not yet been recovered,” the government’s filing states. “The defendants also have access to numerous fraudulent identities and documents purchased on the darknet, and the ability to easily acquire more. Lichtenstein is a dual Russian citizen. The defendants have established financial accounts in Russia and Ukraine, and appear to have been setting up a contingency plan for a life in Ukraine and/or Russia prior to the COVID-19 pandemic.”
Under the heading “Suspicious Ukraine Activity,” the filing describes a month-long trip Morgan and Lichtenstein took to Ukraine in August 2019.
“The couple’s activities in Ukraine at times appear pulled from the pages of a spy novel,” it says.
While they were in the country, Lichtenstein “created and/or modified numerous files in his cloud storage account that contained notes about money laundering and/or false identification documentation with Ukrainian connections,” the filing alleges. One of the folders was labeled “personas,” with subfolders containing Russian and Ukrainian identification documents in other people’s names, the filing says.
One document titled “vendors” allegedly listed “descriptions of multiple darknet vendors and includes notes regarding delivery options to Ukraine,” the filing goes on. “One vendor is marked as ‘can exchange for cash in UA Kiev.’” Another included a note to “Ask about delivery to Ukraine, how it works,” and a third had the name of a seller offering high-quality counterfeit Ukrainian passports, according to the government.
In a file marked “courier,” investigators say they found what appeared to be tracking numbers for packages sent by the darknet vendors listed in the “vendors” document. A note attached to one allegedly read, “Bank debit cards on drops, can guarantee 12 months. Also can make cards for our scans,” along with the notation, “good opsec!” Morgan and Lichtenstein had at least one shipment delivered to a boutique hotel in Kyiv where they weren’t staying but which was located not far from the Hilton, where they were.
The feds say they have gathered reams of additional evidence suggesting Morgan and Lichtenstein intended to go on the run, such as a document titled “ukraine_package,” written in Russian, which explained ‘how to anonymously receive a parcel in Ukraine.’” There were details of the positioning of security cameras in Ukrainian post offices, credentials for multiple email accounts, and a photo of Morgan holding a Kyivstar SIM card.
If the two were to flee to Russia, prosecutors said Lichtenstein “could escape prosecution in the United States indefinitely,” as Russia “does not extradite its own citizens.” In addition, “Morgan’s marriage to Lichtenstein would allow her to qualify for Russian citizenship as well… The files from Lichtenstein’s cloud storage account indicate that Lichtenstein has access to numerous accounts at Russian financial institutions and false Russian identity documents for both male and female personas.”
Morgan and Lichtenstein’s lawyers have been attempting—so far, unsuccessfully—to show that a $3 million bond for Morgan and a $5 million bond for Lichtenstein, both secured in part by their parents’ respective homes, would be sufficient incentive not to skip town. Combined with home detention and GPS ankle monitors, their continued presence in court is all but guaranteed, the defense maintains.
To the contrary, say prosecutors, although a combined $8 million is “significant by any normal measure,” the government argues that the sum “is dwarfed by the value of the funds available to the defendants if they chose to flee.”
“The offer by the defendants’ parents to secure the defendants’ bond with their own homes is generous, but the (unspecified) value of such property is presumably trivial in comparison to the hundreds of millions of dollars in cryptocurrency assets to which the defendants have access,” the filing states, adding, “They could easily buy their parents new homes after fleeing to Ukraine or Russia, or setting up a new life for themselves anywhere with their newly purchased identities.”
Neither Morgan nor Lichtenstein has been particularly cooperative with authorities up to this point, prosecutors said. The month before their arrest, the FBI executed a search warrant of Morgan and Lichtenstein’s apartment. But the couple said they didn’t want to be home while agents combed through their belongings.
“Agents permitted Morgan to retrieve the [couple’s] cat, which was hiding under the bed,” the government’s filing says. “While Morgan was crouched next to the bed calling to the cat, she positioned herself next to the nightstand, which was still holding one of her phones. She then reached up and grabbed her cellphone from the nightstand and repeatedly hit the lock button. It appeared that Morgan was attempting to lock the phone in a way that would make it more difficult for law enforcement to search the phone’s contents. Law enforcement had to wrest the phone from her hands.”
FBI agents seized, among other things, more than 50 electronic devices, in excess of $40,000 cash, and a bag labeled “Burner Phone,” according to the filing. They also may have more cash stashed away, prosecutors believe: The two used some of the stolen Bitcoin to buy more than 70 one-ounce gold coins from various dealers, according to the filing. Yet, agents “did not locate a single gold coin during the search of Lichtenstein and Morgan’s residence or their storage unit,” it says.
On Thursday afternoon, Howell ordered Morgan and Lichtenstein transported from New York to D.C., for a follow-up bail hearing scheduled for Valentine’s Day. Their lawyers did not respond to The Daily Beast’s request for comment.
