The US government is ordering the return of over 94,000 bitcoin stolen in the 2016 Bitfinex hack. Worth $71 million at the time of the theft, the BTC stash is now worth over $11.8 billion, making this one of the biggest asset recoveries in history.
The 2016 Bitfinex hack was a big deal. Ilya Lichtenstein and his wife Heather Morgan (who also goes by her rapper name “Razzlekhan”) pulled it off, stealing 119,754 bitcoin from the exchange.
Bitfinex shut down withdrawals and implemented a recovery plan that wiped out all account balances by 36%. To compensate users, the exchange issued BFX tokens which could be redeemed for cash or converted into equity in its partner platform, iFinex.
Bitfinex redeemed all the tokens within 8 months to fulfill its obligations to users. US prosecutors said Bitfinex had fulfilled its duty to victims.
In 2022, US investigators cracked the encrypted data linking Lichtenstein and Morgan to the stolen funds.
They seized 94,643 bitcoin from a wallet associated with the hack, which is the largest asset seizure in the history of the DOJ. Lichtenstein and Morgan both pleaded guilty to money laundering and hacking charges in 2023. Lichtenstein got 5 years and Morgan 18 months.
Now, in January 2025, a federal court ordered the return of these bitcoin to Bitfinex as part of a voluntary restitution agreement.
“The Court has the authority to order voluntary restitution pursuant to the defendants’ plea agreements,” the government wrote in the filing. This restitution includes 94,643 BTC and smaller amounts of Bitcoin Cash, Bitcoin Satoshi Vision and Bitcoin Gold from subsequent forks.
Bitfinex will use 80% of the recovered bitcoin to buy back and burn its tokens which were issued after the hack to compensate users. The exchange said it will remove these tokens from circulation within 18 months.
Bitfinex is the primary beneficiary of the restitution, but the DOJ noted that some may still consider themselves victims. A webpage was set up to allow affected parties to file claims or objections, with a deadline of November 12, 2024.
On December 9, 2024, Reuters reported that the deadline to object DOJ’s decision for affected 3rd parties who believe have been victimized by the incident is set at January 28, 2025, without citing any sources.
The restitution deal sparked debate on victim status and asset ownership in the Bitcoin space.
US prosecutors argued under the Mandatory Victims Restitution Act that neither Bitfinex nor its users are “victims” since Bitfinex had already compensated its users. But the court’s reliance on plea agreements for voluntary restitution meant Bitfinex would get the recovered funds.
“Clear ruling that property rights of crypto is recognised in the US” said Sunil, an FTX creditor. “FTX customers should be treated the same.”
Most of the stolen bitcoin have been recovered, but 25,000 BTC is still missing due to laundering.
Lichtenstein and Morgan used bitcoin mixers, darknet markets and other sophisticated methods to hide these funds. The DOJ has proposed an ancillary forfeiture process to address these assets but the timeline is unknown.
