Bitfinex hack defendant released from jail

Ilya Lichtenstein, 34, and his wife, Heather Morgan, 31, have been charged with conspiracy to launder bitcoin stolen during the 2016 Bitfinex crypto exchange hack. In today’s prices, the amount laundered would be worth over $5 billion.

$3M bond and no crypto trading

Each defendant faces up to 25 years in prison. On Monday, a judge ruled to release Morgan on bail under strict conditions, CoinDesk reported. Her husband remains in custody.

Morgan will be placed under house arrest with no crypto trading, no internet-connected devices, and a $3 million bond.

Federal agents seized around 94,000 bitcoins (worth over $3.6 billion) from a wallet earlier in February. The private keys were in one of Lichtenstein’s cloud accounts. According to prosecutors, the spouses still have access to bitcoin worth over $300 million.

Couple planned to start a new life in Ukraine

Searches revealed proof that the couple planned to start a new life in Ukraine or Russia. During a trip to Ukraine three years ago, they set up financial accounts and phone numbers. Files containing stolen foreign identities were found on Lichtenstein’s computer.

Judge rebuts allegations of ‘flimsy’ evidence against defendants

During a hearing on Monday, chief US District Court judge Beryl Howell rebutted allegations that the case against Lichtenstein and Morgan was “flimsy,” that evidence was circumstantial and the blockchain tracing technology used to link them to the stolen funds was confusing.

The wallet seized last week, which contained 94,000 bitcoins, is assumed to have been in Lichtenstein’s control because the private keys were found in an encrypted file on his cloud account.

Howell told prosecutors:

Defense counsel has argued that the government has not offered anything resembling direct evidence. Would you say finding the keys is pretty clear direct evidence?

Prosecutors answered in the affirmative. Then, Howell likened the situation to a smoking gun.

Morgan’s naivete plea invalidated

Morgan’s defense has argued she was a naïve wife who didn’t know what her husband was doing, but prosecutors beg to differ. They pointed out she holds a “graduate degree in economics” and played an active role in the money laundering conspiracy. She lied to her accountant, to banks, and to crypto exchanges about where the funds had come from.

She used a company called Salesfolk to launder funds through shell firms based in Hong Kong, where she used to live. According to prosecutors, Salesfolk has never received payment in crypto from a legitimate customer, but was used to launder “hundreds of millions” worth of crypto from “non-existent customers for non-existent work.”