Bitfinex may be eligible for refunds for the 2016 hack of 119,756 Bitcoin (BTC) of the exchange, but the US government is not aware of other eligible parties, according to a file in the case against hackers Ilya Lichtenstein and his wife Heather Morgan.
Bitfinex spread the loss from the hack across its customer base and reimbursed them itself. It appears the government was satisfied with that effort, but it will take further steps “out of an abundance of caution.”
Bitfinex took immediate action to address the situation. The Crime Victims’ Rights Act grants victims the right to full and timely restitution for their losses, and the Mandatory Victim Restitution Act requires perpetrators of crimes to reimburse victims for their losses and related costs.
After the August 2016 hack, Bitfinex “socialized” the loss by reducing all customers’ accounts by about 36% and issuing a new token – BFX – to cover customer losses. BFX holders could sell the tokens on the market or sell them to Bitfinex at the fixed rate of $1 per token. Accredited investors also had the option to exchange their tokens for shares of the capital of parent company iFinex at the same rate.
All BFX tokens were redeemed within eight months. Customers who opted to receive iFinex shares in exchange for their BFX also received new tokens called Recovery Right Tokens, which could be exchanged for $1 in the event the funds were recovered. There is approximately RRT 30 million outstanding. According to the filing, iFinex has agreed to redeem these tokens if it receives a refund.
Despite Bitfinex’s actions to make account holders whole, the government stated that there are potentially thousands of victims who suffered losses as a result of the hack in 2016. The government proposes to create a website where people who feel victimized by the case can get information and self-report.
In February 2022, the United States Department of Justice ordered the arrest of Ilya Lichtenstein and Heather Morgan and has seized cryptocurrency worth $3.6 billion. They later pleaded guilty in a plea agreement. The Department of Homeland Security also seized $312,219.71 in cash and 6,917 Bitcoin Cash in connection with the case in July 2023, distributing the funds pro rata to RRT holders.
At the time of the hack, Bitcoin from Bitfinex was worth $72 million. Today, those coins are worth $7.5 billion.
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