The U.S. government has officially requested the court to facilitate the return of the funds that were maliciously taken from Bitfinex in 2016 back to the exchange. According to officials, these assets are set to be restituted directly.
The digital assets involved in this case encompass approximately 94,000 Bitcoin [BTC] along with an unspecified quantity of Bitcoin Cash [BCH], Bitcoin Gold [BTG], and Bitcoin Satoshi Vision [BSV].
Authorities State Lack of Victims in the Breach
In a legal filing submitted on January 14th, the U.S. government declared that there were no distinct victims related to the specific crimes outlined in this case.
This assertion is rooted in the compensation program that Bitfinex instituted for users affected by the breach. Through this program, losses were generalized, and each user agreed to absorb a 36% loss.
By receiving compensation in the form of BFX tokens or ownership stakes in the parent company, impacted users were made whole, leading the U.S. government to conclude that there were no identifiable victims in this particular instance.
Debate Surrounding the Compensation Scheme
The compensation plan has generated significant controversy primarily due to the substantial increase in Bitcoin’s value since the breach. At the time of the incident, the stolen BTC was valued at approximately $72 million. If Bitfinex reclaims the 94,000 BTC, the current value of these coins would approach $10 billion.
In their most recent submission, authorities highlighted that interested parties could stake a claim for these assets through a separate legal process. However, such claimants would need to substantiate their ownership of the assets and would not be acknowledged as victims.
Largest Seizure by Government of Bitfinex Funds
The hack that struck Bitfinex in 2016 occurred when malicious actors exploited a vulnerability in the exchange’s multi-signature wallets. Of the 120,000 BTC that was stolen, more than 94,000 BTC has been recovered to date. The U.S. Department of Justice labeled the retrieval of these funds as the most substantial financial seizure in history.
Following the arrest of Illya Lichtenstein and his spouse, Heather Morgan, who were involved in attempted money laundering activities, the funds were confiscated.
In the legal proceedings that followed, Lichtenstein received a five-year prison sentence, while Morgan was sentenced to 18 months behind bars.
Contrasts between Bitfinex and Mt.Gox Incidents
While the Mt.Gox breach remains the most significant security breach in cryptocurrency history, with 740,000 BTC stolen, it did not immediately establish a recovery program in the aftermath, unlike Bitfinex.
As per Arkham Intelligence data, Mt.Gox currently holds $3.5 billion worth of Bitcoin. If the reimbursement process commences, users who have been awaiting the recovery of their funds for nearly 14 years may finally have the opportunity to liquidate their holdings, potentially impacting the price of BTC.