• The U.S. government has made a filing seeking to return the funds stolen from Bitfinex in 2016 back to the exchange. 
• In the court filing, the government claimed there were no victims in the hack after Bitfinex enacted a recovery plan.

The U.S. government has filed a submission in court seeking to return the funds stolen from Bitfinex in 2016 back to the exchange. Per the government, these assets would be returned as a “restitution in kind.” 

The crypto assets in question include around 94,000 Bitcoin [BTC] and an undisclosed amount of Bitcoin Cash [BCH], Bitcoin Gold [BTG], and Bitcoin Satoshi Vision [BSV]. 

Government says there is “no victim” in the hack 

In the filing made on the 14th of January, the U.S. government stated that there was “no victim for the specific offenses of conviction in this proceeding.” 

This statement stems from the compensation plan that Bitfinex gave to exchange users who lost funds in the hack. In this plan, the exchange generalized the losses, and each customer was to accept a 36% loss. 

The affected customers received their assets in the form of BFX tokens or shares in the parent company. Under this recovery plan, exchange users were made “whole,” leading the U.S. government to assert that there were no victims in the matter. 

Controversial recovery plan 

This compensation plan has stirred controversy due to Bitcoin’s price growth. At the time of the hack, the stolen BTC was worth around $72M. If Bitfinex receives the 94,000 BTC back, these coins will be worth nearly $10 billion at Bitcoin’s current price. 

In its recent filing, the government stated that any third party can file a claim for these assets through an “ancillary proceeding.” However, they would have to prove ownership of these assets, and they would not be considered “victims.” 

Bitfinex funds were the largest government seizure 

Bitfinex was hacked in 2016 when threat actors exploited a bug in the exchange’s multi-signature wallets. The hackers stole 120,000 BTC, out of which a little over 94,000 BTC was recovered. The U.S. Department of Justice termed the recovered funds as the “largest financial seizure ever.”

The funds were seized after the arrest of Illya Lichtenstein and his wife, Heather Morgan, who had attempted to launder the funds.

The two were arrested in 2022 and later pled guilty in August 2023. Lichtenstein was sentenced to five years in prison, while Morgan was sentenced to 18 months.

Differences between Bitfinex and Mt.Gox hacks

The Mt.Gox hack remains the largest security breach in crypto history where 740,000 BTC were stolen.

However, unlike Bitfinex, Mt.Gox did not formulate a recovery plan shortly after the hack. Instead, the distribution plan is set to begin soon. 

According to Arkham Intelligence, Mt.Gox holds $3.5 billion worth of Bitcoin. If the reimbursement plan commences, exchange users who have waited for their funds for nearly 14 years could begin to sell. This could fail to bode well for BTC.