WASHINGTON — A computer specialist who illegally appropriated bitcoin valued at billions of dollars based on current market rates—and subsequently laundered a portion of the embezzled cryptocurrency with assistance from his spouse—was sentenced to five years in prison on Thursday.
Ilya Lichtenstein orchestrated one of the largest thefts from a cryptocurrency exchange, with federal prosecutors detailing how he and his wife, Heather Rhiannon Morgan, engaged in a complex scheme to utilize the stolen assets.
U.S. District Judge Colleen Kollar-Kotelly emphasized to Lichtenstein that his crime was “meticulously planned” rather than a spontaneous decision.
“It’s important to send a message that you can’t commit these crimes with impunity, that there are consequences,” she remarked.
Lichtenstein, who will receive credit for the two years and nine months he has spent in jail since being apprehended in February 2022, expressed regret for “wasting my talents on crime instead of contributing positively to society.” He mentioned his aspiration to leverage his skills to combat cybercrime upon his release.
“I want to take full responsibility for my actions and make amends any way I can,” he stated.
Meanwhile, Morgan is scheduled to face sentencing on Monday. Lichtenstein has urged the judge to be lenient toward her, attributing her involvement to his influence.
In August 2016, Lichtenstein executed a hack on the Hong Kong-based virtual currency exchange Bitfinex, ultimately stealing about 120,000 bitcoin. At the time of the breach, this was worth nearly $71 million, but its current valuation exceeds $7.6 billion, as per prosecutors.
Months later, he began shifting the stolen bitcoins through a series of intricate transactions designed to obscure their trail across various accounts and platforms, with the assistance of his wife in sanitizing the funds.
Lichtenstein, an entrepreneur and cryptocurrency investor originating from Russia but raised in a Chicago suburb, and Morgan, a writer and business owner known for her rap persona “Razzlekhan,” were arrested in New York City in February 2022, having lived in San Francisco around the time of the hack.
Prosecutors advocated for a five-year prison sentence for Lichtenstein, who entered a guilty plea in August 2023 for money laundering conspiracy, while they suggested an 18-month sentence for Morgan, who has also pleaded guilty to the same charge.
Prosecutors indicated that neither the theft nor the laundering project was an impulsive action. Lichtenstein allegedly spent months acquiring access to Bitfinex’s systems to execute the hack.
He informed Morgan about the hack three years later but initially sought her help in laundering the money without fully disclosing his actions. Prosecutors maintain that while Morgan was a willing partner in the scheme and bears responsibility, she played a lesser role in the operation.
During family travels to Ukraine and Kazakhstan, Lichtenstein met with couriers to gather cash which he smuggled back into the United States.
“Over a span of five years, the defendant utilized some of the most sophisticated money laundering techniques seen by IRS agents,” prosecutors stated.
As the most established form of cryptocurrency, bitcoin operates independently of government or banking systems, with transactions tracked via blockchain technology.
Together, the couple successfully laundered around 21% of the stolen Bitfinex funds—a value of at least $14 million in 2016, escalating to over $1 billion at the time of their 2022 arrest.
Authorities were able to confiscate the remaining assets, worth over $6 billion today.
Prosecutors noted, “He has emerged as one of the most significant money launderers the government has witnessed within the cryptocurrency domain.”
An attorney representing Bitfinex described the hack as “devastating” to both the organization’s financial well-being and its credibility among customers, with the stolen assets representing about 36% of the company’s total assets at that period.
“Bitfinex had to take extraordinary and immediate measures to ensure that any losses from the hack were contained to the company and its shareholders, rather than impacting its customers,” noted Barry Berke in a statement to the judge.
A prosecutor acknowledged that following his arrest, Lichtenstein began cooperating with federal authorities, assisting in investigations related to other cybercrimes.
According to Lichtenstein’s defense attorney, more than 96% of the stolen assets have been recovered, aided by Lichtenstein’s collaboration, with the significant majority of the stolen funds never having been disbursed.
“This is not an evil person,” said the attorney. “This is a good person who simply made grievous mistakes.”