U.S. Court Approves Return of $9.3 Billion in Stolen Bitcoin to Bitfinex After 2016 Hack

The U.S. government has filed a motion to return 94,000 Bitcoin stolen from Bitfinex during a 2016 hack, describing the recovered funds as “restitution in kind.” 

In a January 14th filing, the government stated there was “no victim for the specific offenses of conviction in this proceeding” in this case. 

This conclusion is based on Bitfinex’s recovery plan, which required users to accept a 36% loss on their holdings. 

Customers were compensated through BFX tokens or shares in the exchange’s parent company, enabling many to recover their losses over time.

The filing also allows third parties to submit claims for the recovered assets through an “ancillary proceeding,” provided they can prove ownership. 

However, these claimants would not be considered victims under the legal framework of the case.

The return of the funds has raised questions due to Bitcoin’s significant price increase since 2016. 

At the time of the hack, the stolen Bitcoin was valued at approximately $72 million. Today, the recovered 94,000 Bitcoin is worth over $9 billion, highlighting the substantial impact of Bitcoin’s price growth on the restitution process.

The funds were recovered after the arrests of Illya Lichtenstein and Heather Morgan in 2022, who were charged with laundering the stolen Bitcoin. 

Both pled guilty in August 2023. Lichtenstein was sentenced to five years in prison, and Morgan received an 18-month sentence.

The 2016 Bitfinex hack exploited a vulnerability in the exchange’s multi-signature wallets, resulting in the theft of 120,000 Bitcoin. The U.S. Department of Justice described the recovery of 94,000 Bitcoin as the “largest financial seizure ever.”

For context, the 2014 Mt. Gox hack remains the largest cryptocurrency security breach, with 740,000 Bitcoin stolen. 

Unlike Bitfinex, Mt. Gox did not implement an immediate recovery plan, leaving users waiting for years. 

Mt. Gox holds approximately $3.5 billion in Bitcoin, and a reimbursement plan is expected to begin soon.