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A federal court has determined that 94,643 bitcoin, seized following the infamous 2016 Bitfinex hack, will be returned to the cryptocurrency exchange as part of voluntary restitution agreements tied to plea deals with the convicted perpetrators.
Voluntary Restitution in Bitfinex Hack Includes $9 Billion in Bitcoin
With a valuation exceeding $9 billion, this recovery represents a significant reclamation from one of the most audacious cryptocurrency heists to date. The 2016 breach was orchestrated by Ilya Lichtenstein, who infiltrated Bitfinex’s security systems to steal 119,754 bitcoin from customer accounts. In response to the breach, Bitfinex devised a recovery strategy, which involved reducing all user account balances by 36% and issuing BFX tokens as compensation.
These BFX tokens could either be redeemed for cash or converted into equity in Bitfinex’s parent company, Ifinex, which also released Recovery Right Tokens (RRT) to account for the possibility of future recoveries. The saga took a decisive turn in 2022 when the U.S. Department of Justice (DOJ) cracked encrypted data that implicated Lichtenstein and his wife, Heather Morgan, in the theft. Both individuals pleaded guilty to money laundering, with Lichtenstein admitting to the hack itself.
Their cooperation proved instrumental in the retrieval of 80% of the stolen bitcoin, marking the largest asset seizure in DOJ history. The government still holds this cache of bitcoins. In a Jan. 2025 ruling, the court concluded that Bitfinex and its users do not meet the legal criteria for “victims” under the Mandatory Victims Restitution Act. Nonetheless, the judge invoked plea agreements enabling voluntary restitution to the exchange.
The restitution arrangement accounts for all assets explicitly linked to the hack, while other laundered funds, detailed in government filings, will undergo a separate ancillary forfeiture process. This ruling provides third parties, including Bitfinex account holders, the opportunity to contest the restitution terms. They have until Jan. 28, 2025, to file claims or objections to assert their entitlement to a portion of the recovered assets. The DOJ has also launched a mechanism to collect submissions from individuals identifying themselves as affected parties.
Bitfinex has reaffirmed its commitment to redeem the remaining Recovery Right Tokens distributed to users as part of its 2016 recovery measures. These tokens were designed to allocate recovered funds to those impacted by the hack. The case highlights the intricate challenges of restitution in the cryptocurrency sphere, as disputes over victim status and asset ownership persist in this evolving digital frontier.
The ancillary proceedings, along with any objections raised by customers, are expected to play a critical role in determining the allocation of the remaining assets. With the Jan. 28 deadline fast approaching, the resolution of this high-profile case is poised to set important legal and procedural precedents for restitution in the broader cryptocurrency ecosystem.