Bitfinex Declared Sole Victim Eligible for Recovery of $7.4 Billion Bitcoin Hack

Bitfinex has been identified as the sole entity eligible for restitution related to the 2016 hack that resulted in the theft of approximately 120,000 BTC, valued at around £7.4 billion today. This significant development follows a recent U.S. government filing, which has implications for the exchange and its customers.

Key Takeaways

• Bitfinex is recognised as the only victim eligible for restitution from the 2016 hack.
• The exchange compensated its customers by socialising losses and issuing BFX tokens.
• The U.S. government has seized a substantial amount of the stolen Bitcoin, valued at £5.8 billion.
• Bitfinex plans to use recovered funds to redeem Recovery Right Tokens (RRTs) for its customers.

Background of the Hack

In August 2016, Bitfinex suffered one of the largest security breaches in cryptocurrency history, leading to the loss of 119,756 Bitcoin. The immediate aftermath saw the exchange take drastic measures to mitigate the impact on its users. Bitfinex socialised the losses by reducing all customer account balances by 36% and issued BFX tokens to cover the losses. Customers had the option to redeem these tokens or convert them into shares of Bitfinex’s parent company, iFinex.

Government Filing and Its Implications

A recent filing by the U.S. government has clarified that it is unaware of any other victims eligible for restitution under the Crime Victims’ Rights Act (CVRA) or the Mandatory Victim Restitution Act (MVRA). This positions Bitfinex as the primary party affected by the cyberattack, streamlining the legal process for asset recovery.

The filing states:

“The government is not aware of any person who qualifies as a victim under the CVRA or for restitution under the MVRA, beyond perhaps Bitfinex.”

Recovery Efforts

Bitfinex has been actively collaborating with law enforcement to recover the stolen assets. In February 2022, U.S. authorities seized 94,643 BTC linked to the hack, valued at approximately £3.6 billion at that time. Currently, these funds are worth about £5.8 billion, and they may soon be returned to Bitfinex as the legal proceedings conclude.

In July 2023, Bitfinex received £312,219.71 in cash and 6.917 Bitcoin Cash from the U.S. Department of Homeland Security as part of ongoing recovery efforts. The exchange has contractual obligations to its token holders, specifically those holding Recovery Right Tokens (RRTs) issued after the hack. Bitfinex plans to use any recovered funds to redeem these RRTs, with up to 80% of any remaining assets allocated to UNUS SED LEO token holders.

Market Reactions

Following the announcement of the government filing, Bitfinex’s LEO token surged by 14%, reflecting investor optimism about the potential recovery of funds. However, Bitcoin experienced a slight decline of 0.7%, indicating market apprehension about the influx of recovered Bitcoin into circulation.

Conclusion

The determination that Bitfinex is the sole victim eligible for restitution marks a pivotal moment in the aftermath of the 2016 hack. With the exchange having compensated its users and no other parties identified as victims, the focus now shifts to the recovery of the stolen assets. This development not only impacts Bitfinex but also sets a precedent for how similar cases may be handled in the future.

Sources

• Bitfinex deemed ‘sole victim’ eligible for recovery of £7.4 billion Bitcoin hack, CryptoSlate.
• Only Bitfinex may get restitution in 2016 hack, per government filing, Cointelegraph.