At their bail hearing, Ilya “Dutch” Lichtenstein and Heather Morgan — who have been accused of conspiracy to launder billions in cryptocurrency — argued that they would not flee the country between now and their trial in part because the married couple’s frozen embryos are stored in New York. Judge Beryl Howell delivered an excoriating ruling in which she released Morgan and detained Lictenstein, saying evidence indicated he had the knowledge and the means to flee rather than appear at their trial.
Lichtenstein and Morgan were arrested Feb. 8 for allegedly conspiring to launder stolen Bitcoin currently valued at $4.5 billion. The cryptocurrency was stolen during a major 2016 hack of Hong Kong–based virtual currency exchange Bitfinex, which caused the trading value of Bitcoin to temporarily plummet 20 percent when it happened. According to court documents, the hacker stole 119,754 Bitcoin — worth just $71 million at the time — portions of which were then moved in a “series of small, complex transactions across multiple accounts and platforms” seemingly designed to conceal the “path” of the stolen funds. Through a search warrant, however, authorities traced the funds to accounts belonging to Lichtenstein and Morgan. According to the Department of Justice, the government has seized $3.6 billion in remaining Bitcoin linked to the hack from a “digital wallet under Lichtenstein’s control.” They each face one count of conspiracy to commit money laundering and one count of conspiracy to defraud the United States. They could face a maximum of 25 years in prison if they are convicted.
Samson Enzer, a lawyer for the defendants, argued that they would not flee in part because the government’s case was so weak, in part because they had not yet fled — even after federal agents executed a search warrant at their apartment — in part because they had just renewed their apartment lease in New York, and in part because of their stored embryos. They would “literally be leaving their future behind if they left,” Enzer said, because Morgan, 31, may not be able to conceive a child without in vitro fertilization. When Judge Howell inquired whether the process by which the embryos had been frozen could be repeated, Enzer said, “You would need eggs. You would need good eggs. Those eggs were frozen a long time ago. Those eggs are believed to be viable and you would be taking a risk that the eggs you harvest now might not be viable.”
Prosecutor Catherine Pelker argued that the defendants had the means, particularly access to around $300 million in cryptocurrency that the government had not yet been able to seize, that voided most of their arguments that they would not flee. Both defendants’ parents were in the courtroom, and the defense team had offered to put up their houses as collateral as part of the terms of Morgan’s and Lichtenstein’s release. Pelker said the total funds the defendants had access to could buy their parents new houses, or even a “private island.” She also dismissed the frozen embryos as a reason the accused money-launderers would stay put. “If they are so concerned with their ability to have a family, it’s incredibly difficult to have and raise a family if you’re in jail for 25 years,” she said. That desire only offered additional incentive to run, she argued.
Judge Howell, who earlier in the hearing expressed concern that the couple had not retained separate counsel, sided largely with the government in her ruling. When weighing the evidence against Morgan and Lichtenstein, she said the maze of blockchain transactions was not nearly as opaque as the defense, who suggested the government had no actual proof, was trying to make it sound. “The blockchain leaves a clear path to those with the patience to follow it,” she said. “It is not as confusing as defense describes it.” When assessing the couple’s flight risk, she noted that they were both extremely tech savvy, they had hampered the execution of the search warrant, and they had access to a lot of money, including 71 ounces of gold coins the government alleged had been delivered to their addresses in California and New York.
Beyond this, Lichtenstein’s cloud storage held incriminating documents, like lists of darknet vendors that appeared to sell passports, bank cards, and other forms of identification; tracking information from packages arriving in Ukraine from Russia while they had been visiting Ukraine; and text files created after the package delivery that listed passport and identification details of individuals from Russia. Howell said this evidence indicated the defendants were “skilled and quite resourceful at using lawful and unlawful means at avoiding detention.”
Lichtenstein’s cloud storage also contained what Howell called the “smoking gun” in this case: the access key the government used to move the Bitcoin that remained in the digital wallet where it had been stored since the hack. Howell said because the weight of evidence against Morgan was less than that against her husband, she could be released under very strict conditions, including being held under house arrest and wearing an ankle monitor.
Morgan and Lichtenstein captured national attention for their eccentric social media presence, which seems at odds with the scale and sophistication of the crimes of which the Department of Justice has accused them. Lichtenstein posted videos on TikTok about tasting cat food before buying it for their Bengal, Clarissa, a pet which the pair also allegedly used to try to distract the feds during their search of the couples’ New York apartment, according to court documents. “If it’s palatable to me, it will be palatable to her,” he said in one video. Meanwhile, Morgan is a seemingly satirical rapper who calls herself Razzlekhan (as in “Genghis Khan, but with more pizzazz,” according to her website) and raps about Silicon Valley and her inability to find her Airpods. She also calls herself “the infamous Crocodile of Wall Street,” and claims that she takes on “big software companies,” “healthcare,” and “finance bros” in her songs.
As the three-hour hearing concluded, Judge Howell denied Enzer’s request for Lichtenstein to be held in New York, where he and Morgan live. She allowed defense 10 minutes after the hearing to consult with the defendants, and said that Morgan would be held along with Lichtenstein – in a D.C. jail — until the conditions of her release were arranged.