New US government filings suggest Bitfinex may be the only company eligible for compensation in connection with a 2016 hack that resulted in the theft of approximately 120,000 BTC . After the publication of the document, Bitfinex’s LEO token rose 14% to $6.85.
The document states:
“The Government is not aware of any victims under the CVRA or who may be eligible for compensation under the MVRA, beyond perhaps Bitfinex, Victim Virtual Currency Exchange (“VICTIM VCE”). ”
As reported in court documents, this positions Bitfinex as the main party affected by the cyber attack.
After the hack, Bitfinex reduced all customer account balances by 36% to spread the losses incurred. In return, the exchange issued BFX tokens to its customers, allowing them to sell, redeem, and trade the tokens. By April 2017, all BFX tokens had been redeemed, and some customers opted to receive shares in Bitfinex's parent company, iFinex. “iFinex believes that it is the only victim of the hack that has suffered continued financial loss,” the filing said.
This development indicates that restitution efforts will likely focus on Bitfinex rather than individual account holders, as Bitfinex already compensates users through alternative means. According to Bitfinex's official announcement, the company has been actively working with law enforcement to recover stolen assets. In February 2022, US authorities seized 94,643 BTC (worth approximately $3.6 billion at the time) related to the hack.
The funds that could be returned to Bitfinex after the conclusion of this litigation are currently worth $5.8 billion.
In July 2023, Bitfinex announced that it had received $312,219.71 in cash and 6.917 Bitcoin Cash (BCH) from the U.S. Department of Homeland Security as part of its ongoing recovery efforts. The exchange has contractual obligations to token holders, particularly those who own Recovery Rights Tokens (RRTs) issued after the 2016 events. Bitfinex will use the recovered funds to redeem these RRTs and, after fulfilling these obligations, will allocate up to 80% of the remaining assets to UNUS SED LEO token holders.
In July 2023, Bitfinex said:
“Under the terms of Bitfinex’s contractual obligations to token holders, these amounts will be used to redeem the Right of Recovery Tokens (RRTs) issued by Bitfinex following the 2016 security breach.
There are currently 30 million RRTs in circulation, so the amount collected is not enough to redeem all RRT tokens. Pursuant to Bitfinex's contractual commitments, all RRT holders will be redeemed for $1, after which up to 80 percent of the remaining recovered assets will be paid out to UNUS SED LEO token holders. ”
UNUS SED LEO token holders will not directly receive the recovered Bitcoins, but if Bitfinex is successful in recovering and utilizing the stolen funds as outlined in the plan, You may benefit indirectly through write mechanisms and increased value.
As reported by Bitfinex, the situation involves complex legal proceedings and potential claims from various parties. The determination that Bitfinex is the sole victim for restitution purposes could streamline the legal process and focus on returning assets to the exchange.
The 2016 Bitfinex hack remains one of the biggest security breaches in cryptocurrency history. At the time, this theft had a major impact on the market and raised concerns about the security of digital asset exchanges. Bitfinex’s immediate response included a controversial strategy to socialize losses by adjusting all customer accounts, which sparked debate within the crypto community.
Despite the initial criticism, Bitfinex's approach allowed it to continue operating and ultimately compensate its users. The issuance of BFX tokens served as an interim solution, providing customers with a means to recover funds through redemption or conversion into equity. By April 2017, all BFX tokens were successfully redeemed, marking a milestone in the exchange's recovery efforts.
The focus is narrowed to the exchange itself, as the customer has compensation and no other party is recognized as a victim under the Crime Victims Rights Act (CVRA) or the Mandatory Victim Recovery Act (MVRA). This development could expedite the legal process necessary for the return of seized assets.
Bitcoin fell slightly by 0.7% after the document was released, suggesting that traders are nervous about billions of dollars worth of bitcoin returning to circulation.
[Updated to include price movements of Bitcoin and LEO]
