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Due to a prior reimbursement plan from Bitfinex, many victims of the 2016 hack do not legally qualify as victims eligible for reimbursement.
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Attorneys for the US government recently submitted a motion requesting that the Bitcoin (BTC) forfeited as a result of the 2016 Bitfinex hack should be returned to the cryptocurrency exchange.
The Jan. 14 legal filing stipulated the return of approximately 94,643 BTC and unspecified amounts of Bitcoin Cash (BCH), Bitcoin Satoshi Vision (BSV) and Bitcoin Gold (BTG) generated through hard forks back to the exchange on an in-kind basis.
Ilya Lichtenstein and his wife Heather Morgan, aka Razzlekhan, were both arrested in 2022 and later convicted for the 2016 hack of the Bitfinex exchange, which resulted in the theft of 119,754 BTC.
At the time, the stolen Bitcoin amounted to only $72 million. Today, that same amount of BTC is worth over $11.8 billion — raising debate over Bitfinex’s compensation plan for victims of the hack at the time.
US government’s supplemental motion regarding restitution. Source: Court Listener
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Bitfinex compensation plan and controversial court ruling
Within days of the August 2016 hack, the exchange halted withdrawal activity and implemented a recovery plan.
As part of the plan, Bitfinex socialized monetary losses and announced that all accounts would lose 36% of their value.
Users received an equivalent amount of BFX Token (BFX) to cover their losses or, upon choosing, redeemable for shares of iFinex, the parent company of Bitfinex.
Each BFX token was redeemable for losses denominated in fiat currency, using valuations at the time of the hack.
All the BFX tokens issued by the exchange were redeemed by customers within eight months of launching the recovery program — satisfying the government’s requirement for victim reimbursement.
In October 2024, a legal filing from the US government revealed that Bitfinex would likely be the sole recipient of reimbursement from the case due to its recovery plan to make customers whole.
However, the US government also admitted that there were potentially thousands of customers who had their account value reduced as a result of the hack and the compensation plan.
The government invited victims of the 2016 hack to submit impact statements by Nov. 13, 2024.
Additionally, a website was launched to notify potential claimants of the hack, including Bitfinex account holders, of legal notices impacting claims.
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This article first appeared at Cointelegraph.com News
