Free Lichtenstein: why the Bitfinex hacker won early release

Ilya Lichtenstein wins early release. What it means for crypto.

In early 2026, Ilya Lichtenstein—who laundered proceeds from the hack of the Bitfinex crypto exchange—walked free. Together with his wife, Heather Morgan, he siphoned 119,754 BTC from the platform in August 2016, in one of the industry’s largest thefts.

For years the pair evaded justice. Morgan, whose role authorities deemed secondary, was released in October 2025. Of a five-year sentence, Lichtenstein served about 14 months in federal prison.

We examine why he won early release and what it might mean for crypto.

Who is Ilya Lichtenstein?

According to Russian media, Ilya Lichtenstein was born in 1987 in Rostov-on-Don. At six he moved with his parents to the American state of Illinois. He holds dual citizenship.

He enrolled at the University of Wisconsin–Madison, graduating in 2010 with a BA in psychology. While studying, he became interested in advertising—later founding the marketing firm Nexus Global Inc. and the service MixRank.

In parallel, Lichtenstein worked as a business consultant to various companies, including SalesFolk. It belonged to Heather Morgan, with whom he began a romantic relationship in 2014.

After moving to New York, Lichtenstein continued advising IT projects and took up investing. Morgan became known as a rapper under the moniker Razzlekhan, a blogger and an active social-media influencer.

The Bitfinex hack

On August 2, the Hong Kong-based exchange Bitfinex announced a critical security incident, suspending all operations.

It later emerged that a vulnerability in the implementation of multisignatures, used by the exchange together with the external custody service BitGo, was pivotal. The system’s architecture allowed a series of automated transactions that formally met technical requirements but were, in fact, unauthorised withdrawals.

Only users’ bitcoin wallets were affected; other tokens were untouched. The attackers stole 119,754 BTC ($71.8m at the time, more than $11.3bn at current prices), exceeding 36% of assets.

The market sold off sharply. Bitfinex offered a $3.6m bounty for help recovering the funds, later raising it to $400m.

As part of a financial restructuring, the exchange issued the BFX token, granting clients a claim on potential reimbursement of the unauthorised bitcoin debits. Holders could sell the token on the market, redeem it at a fixed $1, or swap it for equity in the exchange’s parent, iFinex.

In 2017, the platform announced the redemption of BFX and full repayment to all users affected by the theft.

Lichtenstein did not rush to cash out the haul. His strategy relied on slow, fragmented movements: mixers, chains of intermediary wallets, darknet marketplaces and shell companies. Morgan played a significant role in setting up the latter.

Over five years, the pair moved roughly 25,000 BTC from their wallets.

As cybersecurity expert Brett Johnson would later argue, Lichtenstein made many mistakes. He executed complex manoeuvres and repeatedly converted funds across cryptocurrencies, but each time he exited to fiat his real name surfaced. He also used Coinbase accounts directly tied to him.

The investigation and arrests

Despite the layered obfuscation, all transactions were recorded on a public blockchain, enabling retrospective analysis. By the early 2020s, improved graph analytics, correlation of on-chain and off-chain data, and cooperation with centralised services narrowed the suspect pool. The shutdown of the AlphaBay darknet market also played a meaningful role.

In February 2022, the FBI gained access to Lichtenstein’s encrypted cloud storage. It contained private keys to wallets holding the stolen bitcoins and detailed laundering playbooks. That was decisive; Lichtenstein and Morgan were subsequently arrested in New York.

Prosecutors focused on conspiracy to launder money and to defraud the United States, rather than the hack as a standalone offence. The counts carried a combined maximum of up to 30 years.

That same month Morgan posted $3m bail for release to home confinement, while Lichtenstein remained in custody. During proceedings, both pleaded guilty and cooperated with investigators. This helped reconstruct much of the money trail and to seize 94,636 BTC (~$3.6bn at the time) from their wallets.

In the summer of 2024, Morgan was spotted at several crypto conferences, presenting herself as a “Web3 consultant”. The crypto community speculated this was either a search for paid consulting to cover fines or “an attempt to mitigate the sentence by gathering intelligence on behalf of the government.”

In November that year, a US court sentenced Lichtenstein to five years in prison for laundering the exchange’s stolen funds. For aiding the illicit scheme, Morgan received 18 months in prison. The court weighed the scale of harm, duration of the conduct, lack of prior convictions and the guilty pleas. Time already served was credited to Lichtenstein.

Amazon shared plans to adapt the tale. In the end, Netflix released the documentary “Biggest Heist Ever” (Biggest Heist Ever). The streamer soon received a letter from Morgan’s lawyers demanding it stop distribution, accusing the company of invading privacy and spreading falsehoods.

Release

Heather Morgan was released in October 2025 after serving about eight months.

Been meaning to do a “first video back” but tbh have been too busy w/ other stuff I’m excited to announce soon. 🧞‍♀️

Should I just shoot it now from the bath tub with Clarissa? 🤔🤷‍♀️🛁
(My natural habitat 😹🐊) pic.twitter.com/DARIQtn2pD

— Heather “Razzlekhan” Morgan (@HeatherReyhan) October 26, 2025

Ilya Lichtenstein spent roughly 14 months in a US prison and, in early January 2026, won early release with supervision and restrictions on movement.

This was made possible by the prison-reform law known as the First Step Act, signed by Donald Trump in 2018. It provides sentence reductions for inmates assessed as low risk who take part in rehabilitation programmes.

Thanks to President Trump’s First Step Act, I have been released from prison early.
I remain committed to making a positive impact in cybersecurity as soon as I can.

To the supporters, thank you for everything.
To the haters, I look forward to proving you wrong.

— Ilya Lichtenstein (@cipherstein) January 2, 2026

“Thanks to President Trump’s First Step Act, I have been released from prison early. I remain committed to making a positive impact in cybersecurity as soon as I can,” Lichtenstein said.

A US administration representative told the media that the defendant “has served a substantial portion of his sentence and is currently under home confinement consistent with the law and Bureau of Prisons policy.”

In his first thread after release, Lichtenstein shared his impressions of current technology. He praised AI’s ability to recognise objects in the physical world and “learn”, but lamented “unimpressive” progress in language models’ reasoning and problem-solving.

“I do not understand the economy and the labor market. It is an unprecedented boom and, at the same time, a slow-moving apocalypse. It seems this year we are on the brink of a major technological breakthrough,” Lichtenstein wrote.

Implications for crypto

Lichtenstein’s early release, alongside the pardons of Silk Road founder Ross Ulbricht and Binance founder Changpeng Zhao, suggests Donald Trump’s leniency toward figures in the crypto industry.

In comments to ForkLog, Olga Zakharova, head of the legal department at PLAN B, noted that plea deals are typical of the American justice system—if the state stands to gain, liability can be eased in exchange for useful cooperation.

“Trump is, first and foremost, a businessman, and only second a president. He has long talked about turning the US into a global cryptocurrency centre; his campaign was backed by the world’s technocrats, so he cannot deprive himself of the opportunity to build crypto potential. Lichtenstein offers such an opportunity, and here for the US it is no longer all that important how repentant and reformed the defendant is,” the expert said.

Zakharova does not regard this case as a “signal to hackers” that major crypto heists bring lenient terms. The state’s interests remain paramount—be it a defendant’s substantial crypto holdings, unique skills, or the ability to shape public opinion through information technologies.

“In such a case, the offender may not only be pardoned or released early, but also very quickly obtain a green card. The key in all these scenarios is the benefit to the United States; everything else is secondary,” the lawyer concluded.

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The Bitfinex hack exposed the scale of infrastructure vulnerabilities, prompting the industry to revisit security practices and invest more in transaction monitoring. For regulators, blockchain analytics proved its effectiveness as an investigative tool.

Legally, the case showed that complex digital crimes can be prosecuted under existing criminal statutes without exotic frameworks. It also sharpened debate over proportionality of punishment and the aims of incarceration in non-violent cases.