On Monday, a judge ruled that Heather Morgan, aka Razzlekhan, should be released on bail after she and her husband were arrested for allegedly helping launder billions of dollars in stolen Bitcoin. Morgan and her husband Ilya “Dutch” Lichtenstein were previously released on bail last week by another judge, but the government won an emergency stay on the previous order, saying the couple could potentially use millions of dollars of unseized Bitcoin to flee the country.
Monday’s hearing was held to review the release order and consider other incriminating and exculpatory evidence. You can read the two written arguments below, which largely reflect what the parties argued in court. The presiding judge ruled that Morgan could await trial at home if she posted bail, but she did not overturn the stay for Lichtenstein, meaning he would remain in custody.
The couple were arrested on allegations that they tried to launder some of the 119,754 bitcoins stolen in the Bitfinex hack in 2016. While the government seized most of this crypto (worth around $3.6 billion last week), he claims in court documents that there are still millions of dollars he has yet to get his hands on. It also indicates that the couple purchased 70 gold coins with funds related to the attack, which they did not find when searching the couple’s apartment (they discovered empty hollowed-out books, a bag of burn-in phones and multiple cryptocurrency hardware wallets).
Following her arrest, Morgan received a lot of attention on social media after discovering that she had been posting rap music, videos and fashion content under the name Razzlekhan. Snippets of particularly gritty moments from his music videos have been shared online since his arrest was announced, alongside incredulous comments that the person who raps about being the ‘Crocodile of Wall Street’ was involved in the hack from Bitfinex.
During Monday’s hearing, the government argued that Morgan and Lichtenstein could use the unseized funds or gold to escape to a country not particularly willing to extradite them, such as Russia or the United States. Ukraine (Lichtenstein was born in Russia and renewed his passport in 2019, according to the government). He also argued that they would be motivated to do so, given that they could face significant financial penalties and 25 years in prison if found guilty of fraud and money laundering.
The couple’s lawyer argued that they were unlikely to flee for several reasons – Morgan is currently recovering from surgery and she and Lichtenstein’s parents had posted their homes as security for their bond. He also argued that if they had wanted to flee, they would have done so in the week or two before the arrest, saying they would have realized the government was onto them after receiving a notice of subpoena from an ISP, and view seized funds. The prosecution responded by saying it was highly unlikely the couple would realize how much evidence the government had until their arrest, given that much of it had been obtained in cracking encrypted files that Lichtenstein had stored on a cloud service.
Judge said Lichtenstein would not be released on bail because government evidence alleges he largely controlled the funds – Morgan, she explained, was less likely to have access to funds that would help him to escape. She said Morgan would have to abide by the conditions outlined in the original release order, which include house arrest, a location monitoring anklet, restrictions on computer use and a ban. to carry out cryptocurrency transactions.
The argument why Lichtenstein and Morgan should be released on bail, prepared by their lawyers
The government’s argument why Lichtenstein and Morgan should not be released on bail