The Bitfinex Bitcoin Heist With Dutch And Razzlekhan – Act 4: The Plea

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Join us to hear the story of Ilya “Dutch” Lichtenstein, a Bitfinex hacker, and his bedazzled, rapping, and money laundering wife Heather “Razzlekhan” Morgan. Together they stole over $5 billion worth of bitcoin from Bitfinex. This is eCrimeBytes.com Season 2, Episode 10, Act 4: The Bitfinex Bitcoin Heist With Dutch And Razzlekhan – Act 4: The Plea.

Spoiler Alert: Razzlekhan’s music is so bad it makes BigRigBaby look like Dr. Dre.

For the background, please see the prior acts:

The Bitfinex Bitcoin Heist With Dutch And Razzlekhan – Act 1: The Hack

The Bitfinex Bitcoin Heist With Dutch And Razzlekhan – Act 2: The Launder

The Bitfinex Bitcoin Heist With Dutch And Razzlekhan – Act 3: The Search Warrant

Sources:

Transcript:

00:00:10:00 – 00:00:17:13
Keith
Hey welcome back to eCrimeBytes. This is season two episode ten. We’re on the concluding act.

00:00:17:13 – 00:00:25:13
Keith
Number four, the plea. And this is with Dutch and Razzlekhan. They stole a bunch of money from Bitfinex. Then

00:00:25:13 – 00:00:46:06
Keith
they laundered some of it and they tried to launder a lot more. They got caught. There was a search warrant that happened. The law enforcement searched their $1.6 million condo on 75 Wall Street and found a ton of phones, burner phones, things with the words burner phone written on the bag.

00:00:46:09 – 00:01:00:01
Keith
They found that in their apartment, they found cryptocurrency cold storage wallets. They found all sorts of incriminating things. And now we are an act four which is the plea. So

00:01:00:01 – 00:01:14:25
Keith
at this point in time, which is January 31st, 2022, so just a little over a year ago, the government finally seizes the main wallet 4S. And that’s why I told you, remember that number at the very beginning

00:01:14:25 – 00:01:40:14
Keith
act one wallet 4S was that wallet that Dutch took all the Bitcoin from Bitfinex and put it into that wallet before he went and then tried to launder further from there. So they have the lion’s share of the money in it because they hadn’t laundered all of it. Now, originally he stole 119,754 Bitcoin.

00:01:40:14 – 00:01:49:18
Keith
There was some of it that was laundered out, but there was 94,636 Bitcoin left in it.

00:01:49:24 – 00:02:07:19
Keith
So a lot of bitcoin. So the seized amount at the time was worth 3.6 billion and that was even slight more than Jimmy Zhong stole. So what was left over was even more than what Jimmy Zhong stole, I thought.

00:02:07:19 – 00:02:23:22
Seth
But just so we’re clear, forgetting what the valuation was, you know, in 2022, but even in 2016, they had spent tens of millions of dollars, relatively of their Bitcoin. They stole 71 million. They spent like ten or 20 million of it.

00:02:23:22 – 00:02:25:08
Keith
Oh, you’re asking me?

00:02:25:10 – 00:02:26:00
Seth
I’m just saying.

00:02:26:00 – 00:02:30:07
Keith
This was Bitcoin. Yeah, they spent a ton. I mean, it’s like they spent

00:02:30:07 – 00:02:32:12
Keith
20,000 bitcoin.

00:02:32:15 – 00:02:42:09
Seth
Right? So you can do the math. On what? That, you know, that’s a lot of money. It’s millions and millions of dollars way beyond the 1.6 that they had spent on that apartment.

00:02:42:12 – 00:02:52:15
Keith
Oh yeah they spent they spent money I they’d had, they spent money other places. And that’s going to be one of my final thoughts at the end, too, which is where they probably should’ve spent more money.

00:02:52:15 – 00:02:53:06
Keith
Um,

00:02:53:06 – 00:03:16:23
Keith
so and July 20th to 2023. So just recently this year, the couple’s finally charged and this took me a while to research because I could not wrap my brain fully around it, which is they only charge them with money laundering, conspiracy and conspiracy to defraud the United States.

00:03:16:26 – 00:03:40:12
Keith
Nothing. Nothing in there is the actual hack to get the billions of dollars that they now have, which I just thought was amazing. I didn’t have a reason for it. I couldn’t find a reason for it. I didn’t see anybody mention it, but it was just kind of like it never happened, you know? I mean, it happened in the fact that they got money, but it never was that they prosecuted.

00:03:40:12 – 00:04:03:06
Keith
And so with all of this money that they stole, you can imagine I explained to you, it’s been laundered a bunch of different places. They didn’t keep it all in that 4S wallet. So the government wants to get all the money. And so they sort of listing all the different places that they know about that Razzlekhan and Dutch stored their money and there could be even more.

00:04:03:06 – 00:04:06:05
Keith
And that’s going to go through just kind of conceptually

00:04:06:05 – 00:04:07:19
Keith
where they stored their money.

00:04:07:21 – 00:04:09:04
Seth
It was spread out.

00:04:09:04 – 00:04:32:14
Seth
So the government had to unwind where all this laundered cryptocurrency went, right? We know there was around 94,000 and change in Bitcoin and that was seized from while it’s recovered from their online storage. But there was a lot of other stuff so there was also 117,000 in Bitcoin cash and there were fees involved in that.

00:04:32:16 – 00:04:41:00
Seth
There is 117,000 bitcoin in Satoshi version. A lot of in sure what that is, but it’s a different form of bitcoin.

00:04:41:00 – 00:05:00:21
Seth
There was 118,000 and change in bitcoin gold. So I guess bitcoin has several sub type of types of crypto. There was 29,000 and a currency called Monero. Never heard of that. They found stolen currency was actually.

00:05:00:24 – 00:05:11:14
Keith
We’ve talked about Monero cash I think it was like the Twitter hack or something. They kept trying to use Monero thinking it was going to be more secure and then the.

00:05:11:14 – 00:05:13:02
Seth
Law enforcement.

00:05:13:04 – 00:05:15:12
Keith
Actually was still able to trace them.

00:05:15:15 – 00:05:15:28
Seth
Right.

00:05:15:28 – 00:05:40:09
Seth
There were several virtual currency amounts seized from different types of wallets. One had 4500 in USD, one had about 6600 in a a v e not familiar with that. So 13.8 Ethereum So as a mix of actual value and plus different cryptocurrencies, what else we got here Jones?

00:05:40:09 – 00:06:09:19
Seth
There was less than 1.879 of Curv Dao tokens from another wallet or another address. There was almost 2 million in tether, which I have not familiar with as well. There was that was part of a liquidity pool. There was various amounts in various liquidity pools. There was a assorted

00:06:09:19 – 00:06:39:11
Seth
U.S. This is my favorite. There was assorted U.S. and Canadian gold coins excavated, which means they were buried somewhere at a location in California known to the defendants and the government. They don’t give you a where. That’s really, really interesting. But wait, there’s more. We have about 2800 or that 2 million now, 2800 in Bitcoin, there was 12,000 additional Bitcoin from different wallets.

00:06:39:11 – 00:07:04:18
Seth
That was all found in Wall Street, another 1155 Bitcoin also on Wall Street from other wallets. There was, another 901,000 in U.S. DC. I’m not familiar with what that is. This is all down in in the Wall Street address there was another 290,000 in USDT as well from a different wallet, another 5900 in USDT from yet another wallet.

00:07:04:20 – 00:07:07:01
Seth
There was about a thousand and

00:07:07:01 – 00:07:23:20
Seth
there was over a thousand and also USD T there was 7 million. Right? It’s over a million. Excuse me. There was 17 million in Usdc cryptocurrency. So those are probably worth obviously then 1 to 1

00:07:23:20 – 00:07:38:12
Seth
3500 in Yearn vault and approximately $228,000 seized in cash from the JPMorgan Bank account number, there was additional Bitcoin a little almost eight bitcoin from another wallet.

00:07:38:16 – 00:07:58:07
Seth
I mean, this was all over and it’s continues on. There is 1700 in Ethereum. There was 264 more in Bitcoin. There was 352,000 seized from a Wells Fargo bank account. There was .196 Bitcoin from a different wallet. I mean, I’m sure he had reasons for keeping, you know, these really minute amounts,

00:07:58:07 – 00:08:02:00
Seth
another 1400 in Ethereum, another 1.86 in Ethereum

00:08:02:00 – 00:08:11:04
Seth
This is interesting. There was over $2.4 million CS from a smaller bank called Signature Bank. That’s from Flagstar.

00:08:11:04 – 00:08:22:27
Seth
There was another 1000 in w e t h weth, which is another cryptocurrency. Again, all this was seized from 75 Wall Street.

00:08:22:29 – 00:08:23:24
Keith
And so

00:08:23:24 – 00:08:31:21
Keith
when I talked earlier about stuffing money anywhere he could stuff it in order to try to launder it.

00:08:31:21 – 00:08:45:01
Keith
That list right there should give you a flavor of the work that they had to go through to take this money and put it in all these different spots to try to make it look like normal funds coming through, you know, different means.

00:08:45:04 – 00:09:16:11
Keith
And it just it there’s money left over still in the 4S account, the lion’s share that they still haven’t laundered. So that list that we read to you is actually kind of a smidge of the actual heist at the beginning. So August 3rd, 2023, we’re recording this is September 26th. So this just happened. Razzlekhan and Dutch plead guilty.

00:09:16:13 – 00:09:44:18
Keith
So Razzlekhan pled guilty to one count of money laundering conspiracy and one count of conspiracy to defraud the U.S. According to the paperwork it says she’s looking at about five years max for that charge. Now, Dutch, who looks like he’s charged sort of under the same thing. It’s a slightly different law, but it has the same wording to the title, which is just another money laundering law.

00:09:44:20 – 00:10:03:18
Keith
It’s just slightly different. The difference is his is a 20 year max, so we don’t know what they’re going to get yet because they haven’t been sentenced. So we’re just waiting on sentencing and hopefully one of these days, we’ll be able to have an update on what happened with Dutch and Razzlekhan. Any predictions from your side, Seth, on what.

00:10:03:18 – 00:10:28:26
Seth
I mean, we’ve definitely seen kind of a huge spectrum of what some of these defendants get. You know, and it’s not necessarily directly related to how much money, but sometimes is, you know, we know Jimmy Zhong stole a lot, but he also gave it back and willingly helped with the authorities. We have no such information that Razzlekhan and Dutch were in any way, you know, contrite or trying to actually help, you know, refund the money.

00:10:28:29 – 00:10:42:28
Seth
And clearly they were thinking a lot more about what would happen if we got caught. So they can’t say they were just trying to fit in or, you know, had other social issues like Jimmy Zhong. So it’s not a fair comparison. I think she’s going to get the max. I think she’s going to get close to it. I mean, maybe it’s her first time.

00:10:43:01 – 00:11:02:12
Seth
I also suspect that they’ll never they’ll never obviously report this in their court paperwork, but she may flip on him or maybe reverse. Maybe he flips on her. And in an effort to get, you know, not 20 years, but seven years or something where he still has a life left in front of them. Because I’m not convinced that she was a much smaller part of this.

00:11:02:12 – 00:11:22:12
Seth
I think he was the brains behind it, But I think she had the social media and the very, very G rated or that’s not the right word. Q level celebrity status, actually, you know, she had built up some companies, legitimate or not, to help launder the money. So I wouldn’t be shocked if he flipped on her, too, for him to get a lower amount.

00:11:22:14 – 00:11:33:26
Seth
And, you know, maybe they flip on each other. I don’t know. I’d say that she’s probably going to get closer to the max. I think he’ll probably cut a deal and probably get a lower amount.

00:11:33:28 – 00:11:55:16
Keith
She’s a rapper. She’s hard. She may not flip on him. You never know. I mean, five, five years, I think almost kind of sounds doable. But if he’s facing 20, I, I don’t see him getting 20, but I could see him getting close to maybe high tenish, maybe in the middle because they said he was doing stuff as a kid.

00:11:55:16 – 00:11:59:22
Keith
So they know that he had crimes before this, whereas Razzlekhan

00:11:59:22 – 00:12:08:00
Keith
I couldn’t see anything in there that said she ever did anything else bad other than help her husband launder money after he had it from Bitcoin.

00:12:08:05 – 00:12:25:23
Seth
Yeah, I mean, the fact there was they could have broken this down into individual accounts and, you know, had thousands of of criminal, you know, counts against them. Right. So that’s super inefficient. And at some point it becomes silly because, you know, to try that, you know, and they have the consolidated. So I think that the maybe

00:12:25:23 – 00:12:27:04
Seth
the plea already happened.

00:12:27:04 – 00:12:43:06
Seth
I’m not sure how much they’re going to get. I think she’s going to get close to the max. I think the judge is going to realize that that was a serious consolidation of crimes. So I think she’s going to get close to the max. He may not get 20, but he’s certainly no no angel. I think he’ll probably get at least 10 to 15 is probably accurate.

00:12:43:06 – 00:12:50:17
Keith
All right. So we’re at the end of our episode here. Just a few thoughts from Seth and I. I’ll go first. So what I thought

00:12:50:17 – 00:13:04:14
Keith
there are many interesting things in this case, but from a legal standpoint, one of the interesting things I thought was they didn’t charge him with the hack. I don’t know why as a computer person, I can only

00:13:04:14 – 00:13:10:11
Keith
guess that maybe they just didn’t have enough computer evidence to show that it was him.

00:13:10:13 – 00:13:50:26
Keith
I don’t know. So another thought is this is yet another rapper like BigRigBaby did not spend enough of her proceeds on her craft of rapping because, as we said, go watch her videos. Oh, my God, they’re so badly at the look like how I remember videos, how we used to edit them in the nineties on VCR tapes except digital and on YouTube, they’re they’re horribly bad. So here again the forfeiture was on par with Jimmy Zhong we’re talking billions of dollars but I thought as a character Jimmy Zhong was a little more likable.

00:13:50:27 – 00:14:16:22
Keith
You know I learned a little more about his defense and some of the struggles that he went through and that wasn’t really forefront in the case when I went through the documents here. And lastly, Razzlekhan is such a great name that I feel like we’re to be using it in future episodes. And we did tell you it’s spelled k h a n and you kind of feel like it should be spelled c o n at the end of the episode, right?

00:14:16:24 – 00:14:33:05
Seth
She can update it once she does some time, give her some street cred. I agree. I think Razzlekhan is my all time favorite rap name at this point. So as much as bad of a rapper if she is and as terrible of a criminal in person, she is great fucking name. It’s a fantastic rap name.

00:14:33:05 – 00:14:48:12
Keith
All right, So how do you reach us? We have a website. eCrimeBytes. Bytes is spell the computer way. B y as in yellow milk t e s. All our social media is across the top there or is hidden under that button. That’s up in the top there.

00:14:48:14 – 00:15:02:02
Keith
Please. Whatever you’re on like and subscribe. If you’re on Apple Podcasts, five star review and then just type in whatever episode was your favorite. That lets us kind of tally what people like the most. And I can aim more episodes that way.

00:15:02:02 – 00:15:08:22
Keith
Lastly, I want to give you a preview of next week. Oh, this is this is quite the image, Seth.

00:15:08:25 – 00:15:30:21
Keith
Now I’m going to read you the title and then I’m going to I’m going to give you my explanation on the picture. And the audio people are probably like, What the hell are they talking about? Video people are like, Where did you get that picture? The title is Instagram influencer Danielle miller’s $1 million COVID loan fraud. So since she’s an Instagram influencer,

00:15:30:21 – 00:15:52:21
Keith
there’s obviously a ton of pictures of her out there. So I went to her Instagram and just picked one in the middle, and it’s her and another lady, ironically, practicing social distancing during COVID while we talk about her COVID loan fraud. If you can’t audio listeners, if you don’t know what she’s doing based that I invite you, you’re going to have to go.

00:15:52:28 – 00:16:14:08
Keith
You’re going to have to go check out the video or go to our website and click on one of these thumbnails because we have those two young ladies together not practicing social distancing, but it’s PG 13. So with that, I hope you come back because this this is a crazy just I don’t know what it is. It’s like this case is a very crazy case of what she does.

00:16:14:08 – 00:16:15:01
Keith
Sort of like

00:16:15:01 – 00:16:28:16
Keith
Mr. Bryant from a few episodes ago in order to con people out of money to make it look like she’s rich on Instagram. And it’s a pretty interesting story. So I hope come back for that and we will see you next week. Thanks. Bye bye.

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