Hello. It looks like you�re using an ad blocker that may prevent our website from working properly. To receive the best Tortoise experience possible, please make sure any blockers are switched off and refresh the page.

If you have any questions or need help, let us know at memberhelp@tortoisemedia.com

Sensemaker: Lessons of Razzlekhan

Sensemaker: Lessons of Razzlekhan

What just happened

Long stories short

  • Ukrainian and Russian-backed forces reported shelling across a ceasefire line in eastern Ukraine. 
  • France announced it was pulling its forces out of Mali after a six-year mission to suppress jihadism in the Sahel that is now widely seen as having failed.
  • British police said they would investigate claims Prince Charles’s charity, the Prince’s Foundation, offered honours to a Saudi citizen in return for funds.

Lessons of Razzlekhan

Cryptocurrencies have attracted the attention of fraudsters on the basis that law enforcement ought to find it hard to detect theft, track laundering efforts, freeze assets and prove anything in court. 

Wrong, wrong, wrong and wrong, says the US Department of Justice, and it has a point. Item in evidence: the curious case of Heather Morgan (also known as the rapper Razzlekhan) and her husband, Ilya Lichtenstein. 

Morgan and Lichtenstein were arrested in New York last week, accused of attempting to launder $4.5 billion worth of bitcoin. The DoJ seized $3.6 billion of it in its biggest ever haul of cryptocurrency. The case is worth examining as an indication that even in the sophisticated pursuit of cybercrime, people matter. 

A timeline:

August 2016 – Bitfinex, then one of the world’s largest cryptocurrency exchanges, is hacked. A total of 119,754 bitcoin are stolen and sent to a single digital wallet, wallet 1CGA4. At this point the bitcoin are worth $71 million.

January 2017 – the holders of wallet 1CGA4 start moving small amounts of crypto out of it to begin converting it into cash. 

31 January 2022 – Special Agents from the US Internal Revenue Service gain access to the wallet with a search warrant and find 2,000 virtual currency addresses all linked to the 2016 hack, and to Lichtenstein.

4 February 2022 – a court allows the IRS to freeze the bitcoin left in wallet 1CGA4, which by this time are worth $3.6 billion.

8 February 2022 – Morgan and Lichtenstein are arrested in Manhattan, charged with conspiracy to launder cryptocurrency.

Lesson 1. Cleaning up stolen bitcoin is difficult:

  • Information about its origins and the transactions made is encoded digitally – and publicly – on a blockchain that anyone with the right skills can decipher. 
  • Most exchanges require users to prove their identity before converting crypto to cash. Cashing in stolen coins through an account linked to your home address, driving license and passport number isn’t smart for a criminal, but Morgan and Lichtenstein tried it anyway.

They did also attempt some “sophisticated laundering techniques”. According to an extraordinary affidavit by IRS special agent Christopher Janczewski, the pair tried…

  • Shuffling: Small amounts of bitcoin were moved out of the first wallet and into a series of other accounts in complex transactions designed to make it difficult to trace the funds. 
  • The dark web: Bitcoin were moved onto a dark web platform called AlphaBay before being transferred into accounts on legitimate virtual exchanges. 
  • Chain hopping: Some bitcoin were converted into other cryptocurrencies, a technique that creates a new blockchain ledger and obscures the old blockchain data attached to the stolen bitcoin. 

The IRS tracked the bitcoin across the web using software that can seek out patterns – or “clusters” – in publicly available data on crypto ledgers to find out where the wallets containing the stolen currency were, and who they belonged to. 

The search was helped by specialist knowledge on the judicial side: the judge who authorised the warrant, Zia Faruqui, served as lead prosecutor in a number of previous cryptocurrency cases. In an opinion supporting the warrant he applauded the precision of the search tools used by the investigating agents. “Humans are ‘Flawed. Weak. Organic,” he wrote, “whereas clustering software strives for perfection.”

Lesson 2. “Cryptocurrency is not a safe haven for criminals.” Thus Lisa Monaco, the US deputy attorney general. She said meticulous law enforcement work had defied the crypto couple’s pursuit of digital anonymity, showing the DoJ can still “follow the money, no matter what form it takes”.

Yes but… This investigation was made easier by the fact that these criminals were a) based in the US; b) using software the agents could access with a warrant; c) not as sophisticated as they seem to have thought. They made mistakes, like linking some of the crypto wallets to accounts set up using their real names and driving licenses. They even had goods bought with the stolen coins sent to their apartment. Cannier criminals wouldn’t do this, and foreign ones are harder to arrest. 

To note: Not all crypto exchanges require proof of identity. Most of those that don’t are in Russia and Eastern Europe, and most of those are in one prestigious Moscow skyscraper, the Federation Tower.


Every day this week at 1.45pm GMT on Radio 4 you can listen to the series Tortoise produced for the BBC on the tank debt that has stood in the way of Nazanin Zaghari-Ratcliffe’s release. In Episode 4, Richard Ratcliffe, Nazanin Zaghari-Ratcliffe’s husband, begins his public campaign to win her freedom. And the British government explores some creative solutions for paying off a debt it owes to Iran.

You can also join us next Tuesday at 6.30pm GMT for a ThinkIn with Richard Ratcliffe and Sherry Izadi as we explore how a 1970s arms deal is impacting families today.

Wealth investment, fairness, prosperity

Purpose pays
Fund managers with assets worth £675 billion have joined forces to refute an activist investor who said Unilever’s CEO had “lost the plot” in his pursuit of purpose as well as profit. Terry Smith’s attack on Alan Jope’s leadership was followed by Unilever’s failed bid to acquire part of GSK, and a slump in Unilever’s share price. Slowly, defenders of stakeholder capitalism (as distinct from the red-in-tooth-and-claw version concerned only about shareholder returns) have rallied to the cause. First Paul Polman, Jope’s predecessor, wrote an op-ed for the FT arguing that critics of “woke” capitalism were wrong, and now 17 organisations representing more than 50 UK asset owners have signed a letter to the paper insisting that stakeholder capitalism with ambitious net zero targets creates long-term value. “Our interest as asset owners must focus on what is financially material,” the signatories write. The implication being that this includes workers’ morale, pay and diversity and the livability of the planet – and that those who haven’t grasped this will be the losers in the end.

belonging identity, society, beliefs, countries

Italian appeal
Nine Italian campaign groups have issued a call for an independent national inquiry into sexual abuse by Catholic clergy, on the scale of investigations already carried out in Germany and France. Seven of the nine groups are led by women, one of whom, Paola Lazzarini of Women in the Church, said the inquiry should have access to the archives of every diocese, convent and monastery in the country. The great unanswered question is whether the church in Italy would cooperate with an inquiry it did not itself control. Pope Francis has said he was “shamed” by the findings of the French inquiry last year, which found that 330,000 children had been abused by French clergy over 70 years. But he has not called for a similar investigation in Italy and the Vatican had no immediate response to the nine groups’ appeal yesterday. One abuse victim said it was clear “the church is not able to handle this”. Indeed.

New things technology, science, engineering

Clegg’s metaverse 
A premiership for Nick Clegg, at last. The former deputy prime minister of the UK has been promoted to President of Global Affairs at Facebook’s owner Meta. Clegg’s new role puts him on a par with Mark Zuckerberg himself. Clegg joined the social media giant in 2018 to run its global communications team. In his new role, he’ll focus on regulatory issues. He’ll be busy: the company has yet to seriously address a whistleblower’s account that Facebook routinely puts profit before safety, or a number of journalistic and political inquiries that found other Meta brands – including WhatsApp and Instagram – amplify disinformation. But he’ll be paid for it. His old Meta salary was £2.7 million.

The 100-year life health, education, living, public poliCY

Sydney shark 
Sydney’s beaches are being closed after the first victim of a fatal shark attack in 60 years was named as British ex-pat Simon Nellist. Reports from onlookers aren’t for the faint-hearted. The great white shark, “at least three metres” in length, was seen viciously attacking Nellist while he swam in the summer heat. Australia and shark attacks go way back but in New South Wales measures like jet-ski patrols, drone surveillance and nets have for the most part been effective in protecting the public. The authorities are now searching for the shark along the coast. 

covid by numbers

1.3 millionAstraZeneca doses reported to have expired in 19 African countries in the week ending 6 February, according to a WHO. 

Our planet environment, natural resources, geopolitics

Coal shutdown
Australia’s biggest coal fire plant is closing and the sun is to blame. More specifically, the “unsustainable pressure by cleaner and lower-cost [energy] generation including solar, wind and batteries” is putting coal out of business, according to Origin Energy’s chief executive, Frank Calabria. The Eraring plant in New South Wales will close in 2025, seven years earlier than previously planned. A 700-megawatt mega-battery is set to take its place. That won’t compensate by itself for the 2,880-megawatt plant’s output, but climate activists and market pressures more broadly have forced Origin’s hand. The Australian government is less than happy about the closure. Federal energy and emissions reduction minister, Angus Taylor, said it was “bitterly disappointing for all energy users”, citing the potential for a price spike. Filling the supply gap by the 2025 deadline will likely require a significant investment in other renewables in the region. Good. 

Thanks for reading. Please share this around and tell us what we’ve missed. News tips and story ideas are welcome. Email them to sensemaker@tortoisemedia.com.

Ella Hill 

With additional reporting by Phoebe Davis and Giles Whittell.

Photographs Instagram, Elizabeth Williams/AP/Shutterstock, Alessandra Benedetti/Corbis via Getty Images, Alamy Images

in the tortoise app today