WASHINGTON, D.C. — A federal judge has ordered one half of the couple accused of laundering the proceeds of a 2016 Bitfinex hack to remain in federal custody until they face trial.

Prosecutors allege that Ilya Lichtenstein, 34, and his wife, Heather Morgan, 31, conspired together to launder 119,754 bitcoins – worth over $5 billion in today’s prices – that were stolen during the 2016 hack of Bitfinex. The couple faces two conspiracy charges each that could see them face up to 25 years in prison. A judge ruled Monday that Morgan could be released on bail under strict conditions, but Lichtenstein will remain in custody pending trial.

Monday’s decision, made by Beryl Howell, chief judge of the U.S. District Court for the District of Columbia, overturns an earlier order made last week by a New York magistrate judge to allow the couple to be released on bond. Howell had already previously stayed the order on an emergency basis after the New York judge said they could be released on bail.

Howell sided with prosecutors’ position that the couple have both the motive and means to skip bail and flee the United States.

Earlier this month, federal agents seized approximately 94,000 bitcoins (worth over $3.6 billion) held in a wallet whose private keys were found in one of Lichtenstein’s cloud accounts. However, the government alleges the couple still has access to bitcoin worth over $300 million.

Prosecutors also say searches of the couple’s documents revealed evidence of the couple’s alleged plans to set up a life in Ukraine or Russia, including the establishment of financial accounts and phone numbers during a 2019 trip to Ukraine and files on Lichtenstein’s computer containing stolen Russian and Ukrainian identities, both male and female.

At Monday’s pre-indictment hearing, Howell shut down allegations made by plaintiffs in documents filed last week that the case against Lichtenstein and Morgan was “flimsy,” that the blockchain tracing technology used to link them to the stolen funds was “confusing” and the evidence against them “circumstantial.”

“I totally disagree with that characterization [of the evidence],” Howell told Samson Enzer, an attorney for the defense.

Prosecutors told Howell, a crypto savvy judge, about the wallet, referred to as “S4,” containing $3.6 billion worth of bitcoin seized last week. Because the private keys were found in an encrypted file on Lichtenstein’s cloud account, the government alleges that the wallet must then have been in Lichtenstein’s control.

Howell concurred, telling the court she understood that crypto investors “jealously guard” their private keys.

“Defense counsel has argued that the government has not offered anything resembling direct evidence,” Howell told prosecutors. “Would you say finding the keys is pretty clear direct evidence?”

When prosecutors answered in the affirmative, Howell continued:

“Sort of like the smoking gun?”

The prosecutors confirmed, again.

Howell also asked prosecutors to expand on the alleged money laundering conspiracy, as well as what evidence the government had that the couple was in control of the remaining bitcoins not recovered in the seizure of S4’s contents.

They attempted to explain a complex web of transactions out of wallet S4 and into various wallets, exchanges and shell companies but claimed that many of them were “single transactions,” from the wallet controlled by Lichtenstein.

Prosecutors told Howell that approximately 7,500 missing bitcoins had been traced to 24 addresses believed to be controlled by the couple that the government has not yet been able to find. The bitcoins in most of the 24 wallets were “direct sends” from S4, prosecutors say.

“It appears they were setting up savings accounts,” prosecutors said of the wallets.

Howell also considered the defense’s position that the case against Morgan was weaker than the case against Lichtenstein, and that the only evidence against her was she had “allegedly received funds that are tied to the act.”

Howell told prosecutors she wanted to address concerns Morgan was “some sort of a naive wife” who had no idea what her husband was doing.

Prosecutors told the court Morgan has a “graduate degree in economics,” was familiar with crypto and had taken an active role in the alleged money laundering conspiracy, lying to banks, crypto exchanges and her accountant about where the funds had come from and actively using her company to launder funds through Hong Kong-based shell companies. (Morgan used to live in Hong Kong, prosecutors pointed out).

Morgan would “absolutely have the ability and connections” to hide the remaining bitcoins and “disappear,” prosecutors told Howell.

Prosecutors also told the court Morgan’s startup, Salesfolk, despite allegedly being used to launder “hundreds of millions” worth of crypto from “non-existent customers for non-existent work that [Morgan’s] business hasn’t actually done,” had never been paid in crypto from a legitimate client.

Howell ultimately sided with the defense and agreed to release Morgan on bond, upholding the original conditions set by the New York magistrate judge last week.

Conditions include house arrest with no internet-connected devices, no cryptocurrency trading and a $3 million bond – including her parents’ home in Northern California, where Morgan’s parents have lived since 1997.

“I want an ankle bracelet,” Howell said.

Morgan’s list of health problems, including recent breast surgery, asthma (defense attorneys told the court that Morgan suffered a “serious asthma attack” over the weekend in jail because she had not been given an inhaler) and lung damage from a prior infection featured heavily in the defense’s argument that she should be released on bond.

Morgan’s struggle with endometriosis, which her attorneys told Howell led her to have her eggs frozen “several years ago,” was also referenced frequently by the defense.

The couple’s attorneys told Howell they had been preparing for in-vitro fertilization before the investigation began and had frozen embryos stored at a New York hospital.

“It’s the only realistic prospect of them having children,” Enzer told the court. “They would literally be leaving their future behind if they left.”

Howell pushed back, saying that if the couple had access to the $330 million prosecutors say they do, they could obtain quality health care in other countries.

Enzer also told Howell the lien against her parents’ house – their only asset – would serve as a “moral suasion” for her to cooperate with the court.

Prosecutors fired back, saying they didn’t doubt the sincerity of either Lichtenstein’s or Morgan’s parents, but “several hundred million dollars of crypto [could buy each set of parents] a private island.”

UPDATE (Feb. 15, 2022, 01:30 UTC): Updated with additional context from the hearing.