Bitfinex might qualify for restitution for the 2016 hack of 119,756 Bitcoin (BTC) from the exchange, but the United States government is unaware of any other parties that qualify, according to a filing 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 prompt action
The Crime Victims’ Rights Act grants victims the right to full and timely restitution for their losses, among other things, and the Mandatory Victim Restitution Act requires the perpetrators of crimes to reimburse their victims for their losses and associated expenses.
After the August 2016 hack, Bitfinex “socialized” the loss by reducing all customers’ accounts by approximately 36% and issuing a new token — BFX — to cover the customer losses.
BFX holders were able to 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 of exchanging their tokens for shares of parent company iFinex’s capital stock at the same rate.
All BFX were redeemed within eight months. Customers who chose to receive iFinex shares in exchange for their BFX also received new tokens, called Recovery Right Tokens, that could be redeemed at $1 in the event that funds were recovered. Around 30 million RRT are outstanding.
According to the filing, iFinex has agreed to redeem those tokens if it recovers funds.
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Potential victims can still be heard
Despite Bitfinex’s actions to make account holders whole, the government stated:
“There are potentially thousands of VICTIM VCE [Bitfinex] accountholders whose accounts lost value in 2016 as a result of this hack.”
The government is proposing to create a website for people who feel they are victims in the case can receive information and self-report.
Source: Bitfinex’ed
In February 2022, the United States Department of Justice ordered the arrest of Ilya Lichtenstein and Heather Morgan and seized cryptocurrency worth $3.6 billion. They later pleaded guilty in a plea deal.
The Department of Homeland Security seized $312,219.71 in cash and 6.917 Bitcoin Cash (BCH) connected with the case in July 2023. Those funds were distributed among RRT holders on a pro-rated basis.
At the time of the hack, the Bitcoin taken from Bitfinex was worth $72 million. Today those coins are worth $7.5 billion.
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