Federal Prosecutors Seek 18-Month Sentence for Bitfinex Hacker

U.S. federal prosecutors are advocating for Heather Morgan, also known as “Razzlekhan,” to receive an 18-month prison term due to her involvement in laundering 120,000 Bitcoins stolen from the crypto exchange Bitfinex in 2016.

Details of the Case

In a court filing dated October 9, federal authorities requested a more lenient sentence for Morgan, highlighting her “substantial assistance” during her and her husband Ilya Lichtenshtein’s plea negotiations in July 2023.

• Prosecutors characterized Morgan as a “lower-level participant” compared to Lichtenshtein.
• They pointed out that she spent only a “small fraction” of the stolen funds.

Plea and Charges

Morgan pled guilty to charges of money laundering and fraud in August 2023 for her role in laundering the 120,000 Bitcoins, currently valued at approximately $7.2 billion. She faces a potential maximum sentence of 10 years in prison.

Background on the Crime

Initially, Morgan and Lichtenshtein were believed to solely be involved in laundering the funds from the 2016 Bitfinex hack. However, Lichtenshtein subsequently acknowledged his involvement in the hack and also pled guilty to money laundering charges.

• Lichtenshtein pled guilty to one count of conspiracy to commit money laundering.
• He faces a maximum sentence of 20 years in prison.

Nature of the Criminal Activities

Prosecutors asserted that Morgan was “initially unaware” of the origins of the stolen Bitcoins. By 2020, Lichtenshtein revealed his responsibility for the hack, and Morgan participated in laundering the stolen funds and concealing his involvement.

Federal authorities emphasized:

• Morgan made a deliberate choice to partake in criminal activities, helping her husband launder millions for their own benefit.
• This was not an impulsive action; instead, it was a lengthy engagement in criminal conspiracies.

Additionally, the prosecution noted that both Morgan and Lichtenshtein employed sophisticated technological methods to launder the stolen Bitcoin.

Use of Stolen Funds

It was revealed that Morgan utilized part of the stolen assets to purchase physical gold coins, which she buried in a “secret location,” now disclosed to the authorities.

Restitution and Sentencing

Alongside Morgan’s 18-month prison term, prosecutors are seeking a court order for her to return crypto assets that had been seized from the “Bitfinex Hack Wallet” as restitution to the exchange.

The wallet reportedly holds around:

• 95,000 Bitcoins
• 117,400 Bitcoin Cash
• 117,400 Bitcoin Satoshi Vision
• 118,100 Bitcoin Gold

This total is worth over $6 billion. The sentencing hearing for Morgan is set for November 15, following Lichtenshtein’s sentencing on November 14.