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The US mocks the ‘bluster’ of a couple accused of a massive cryptocurrency fraud

Prosecutors charged a Manhattan couple with attempting to launder billions of dollars in Bitcoin stolen from the Bitfinex currency exchange, criticising the couple’s “bluster” in a bail request and pushing a judge to keep them locked up until trial.

The US Justice Department claimed in a court filing Thursday in Washington that Ilya Lichtenstein, 34, and Heather Morgan, 31, have “extremely concerning” international ties and fake identities, as well as access to hundreds of millions of dollars in cryptocurrencies, making them flight risks.

“The defendants’ incentive to run has drastically increased now that they have been accused and see the strength of the case,” prosecutors wrote in the petition.

Chief Judge Beryl Howell granted the government’s request to move Lichtenstein and Morgan from New York to Washington and delayed a hearing on the bail issue from February 11 to February 14, so the defendants could appear in person.

The petition was in response to the couple’s Wednesday claim that they should be released on bail because the case has “significant flaws” and is based on circumstantial evidence that lacks supporting emails and text conversations concerning the alleged conspiracy.

“Regardless of the defense’s bravado in the letter brief, the evidence of the offence is solid,” the US noted. “The government recovered stolen Bitcoin valued at $3.6 billion from defendant Lichtenstein’s personal account, an account that directly received the hack’s earnings — a subject neatly glossed over by the defendants’ letter brief.”

Following the largest financial seizure in history, the government faces an early test in the form of the bail issue. Lichtenstein and Morgan have been charged with conspiring to launder 119,754 Bitcoin taken during the Bitfinex theft in 2016. A Washington judge temporarily halted the couple’s bail after the US filed an emergency request to review a New York judge’s decision allowing them to stay at home with electronic monitoring and $8 million in bonds.

“This appears to me to be a pretty compelling case for denial of bail,” said Matthew L. Schwartz, a former federal prosecutor in Manhattan who is now a white-collar criminal defence attorney and is unaffiliated with the case. “Because it’s a multibillion-dollar crime, the risk of being sentenced is extremely significant, which gives an incentive to escape.”

Prosecutors also faulted the couple’s statement for portraying Morgan “as an unsuspecting spectator to any alleged misconduct, whereas she in reality played a key role in the money laundering and fraud plan,” according to prosecutors.

The pair maintained in their previous petition that by staying put even after learning they were under investigation months ago, they had already demonstrated their willingness to cooperate with the investigation.”Access to wealth did not inspire them to run at those times, and there is no compelling reason to suppose it would prompt them to flee now,” their lawyer argued.

U.S. prosecutors haven’t completely explained the loss of Bitcoin in 2016, which is now worth around $4.5 billion, and their filings in the criminal case don’t identify who was responsible for the attack.

 

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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