Bitfinex’s $9B BTC Drama Heats Up

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In January 2025 a US federal court ruled that 94,643 of the 119,754 BTC stolen in the 2016 Bitfinex hack must be returned to the exchange.

At the time of the hack the stolen BTC was worth $72 million, by January 2025 it was worth $9 billion. What are the ethics of the restitution process and how will this affect Bitfinex users?

The DOJ had seized 94,643 BTC related to the hack in 2022 and are still working to recover the rest. Now they can return most of it to Bitfinex. This is a big step towards restitution but has caused a lot of controversy especially on how the funds will be distributed to Bitfinex users.

 

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Ethical Questions Over Client Restitution

The ruling has raised questions of fairness. Bitfinex is the only victim of the hack but all users who had funds on the exchange in 2016 were affected, even those who weren’t directly hacked. In response to the hack Bitfinex cut every deposit by 36.06% and issued BFX tokens to users as compensation. These tokens could be redeemed for cash or converted into iFinex equity.

The 2016 compensation approach was controversial and with the massive depreciation of Bitcoin after the hack many users are unhappy with the restitution process. But the court’s ruling gives hope to these users as they now have until January 28, 2025 to file a claim for a portion of the returned Bitcoin.

The Role of Ilya Lichtenstein and Heather Morgan

The Bitfinex hack has another layer of complexity with Ilya Lichtenstein and his wife Heather Morgan. Lichtenstein is a low profile IT entrepreneur and Morgan is a former writer turned rapper under the moniker “Razzlekhan” were arrested in 2022 for their role in the hack and money laundering.

Lichtenstein took full responsibility for the hack and got 5 years, Morgan is facing 3 years and denied any knowledge of the hack. Their story is so weird that it even got a Netflix documentary about them. In a recent prison video Lichtenstein apologized and offered to return all stolen funds.

Controversy Surrounding the Return of Stolen BTC

The decision to return the stolen BTC to Bitfinex instead of keeping it under US government control has caused a big debate. Those against the ruling say returning the funds to a company based in British Virgin Islands and Taiwan undermines the transparency and ethics of the crypto space. Others say the funds should go back to the affected Bitfinex users but the deadline to claim restitution is too short.

In the end Bitfinex can get most of its stolen assets back and release the funds into the market. Whether this will help the clients or make things worse is to be seen.

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ABOUT THE AUTHOR See More
Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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