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young money

A millennial husband and wife duo in New York were arrested earlier this month for allegedly conspiring to launder US$4.5-billion worth of bitcoin. One is described as a “cringe rapper” who calls herself Razzlekhan because, in her own words, she is like Genghis Khan but with more pizzazz. The other is an occasional magician.

Netflix has already ordered a docuseries about the couple, who each face up to 25 years in prison. The director of Tiger King is attached to the project, which is perhaps the only thing that isn’t shocking about the whole sordid affair because almost everything about the story is surreal.

It hasn’t been revealed exactly how this couple came into possession of the 119,754 bitcoin that were stolen in 2016 from Bitfinex, one of the biggest virtual currency exchanges in the world, but the details about how they attempted to launder a portion of the coins were provided in the statement of facts published by the United States Department of Justice on Feb. 8, along with the news that the government had successfully seized US$3.6-billion of the stolen cryptocurrency just days before the announcement. When the coins were initially stolen they were worth about US$72-million, but given the increase in the price of bitcoin since then the figure would be more than US$4.5-billion today.

If this couple took a course on how to allegedly launder money, they must have decided to do the exact opposite of everything that was taught. The husband, Ilya “Dutch” Lichtenstein, apparently founded a blockchain startup that (please don’t take a sip of your coffee before reading this) wanted to stop fraud and terrorism, and the wife, Heather “Razzlekhan” Morgan, actually penned articles for Forbes, including one in which she provided advice on how to protect businesses from cybercriminals.

The brazenness of their Jekyll and Hyde personas almost mirrors Bernie Madoff, who sat on regulatory advisory committees while at the same time defrauding investors of billions of dollars. However, the similarities end there. Mr. Lichtenstein and Ms. Morgan’s alleged laundering activities seem sophisticated for the most part, but were littered with a few comically bad missteps.

They allegedly kept a copy of their usernames and passwords in a cloud account, set up accounts at regulated exchanges that required them to upload their photos and identification documents, and converted some of the ill-gotten bitcoin into gold, which they then had delivered right to their home address.

There are still many unanswered questions: How did they allegedly come into possession of the stolen bitcoin in the first place? Is it easy or hard to try and launder cryptocurrency? Did they only get caught because they are stupid? Keep in mind that none of the accusations have been proven in a court of law. And who will play them in the Netflix show?

One thing is clear. The masses who are attracted to the idea of cryptocurrency adoption to circumvent government oversight do not realize the paradox that greater adoption will necessarily require greater government oversight. Crypto investors should prepare for more of that in the future.

Preet Banerjee is a consultant to the wealth management industry, founder of MoneyGaps.com, chair of FAIR Canada, and partner at Wealthscope.