Federal Court Orders Return of 94,643 Bitcoin to Bitfinex Exchange After 2016 Hack

A federal court in Manhattan has ordered the return of 94,643 Bitcoin (BTC) to cryptocurrency exchange Bitfinex, following the 2016 Bitfinex hack. The Bitcoin, currently valued at about $3.9 billion, was seized by the Justice Department after the arrests of Heather Morgan and Ilya Lichtenstein.

The court ruled that Bitfinex is the primary victim of the hack, a decision that aligns with plea agreements reached earlier this year by Morgan and Lichtenstein. Both the convicted individuals and iFinex, Bitfinei’s parent company, agreed in the plea agreements that Bitfinex users would not be classified as “victims” under U.S. law.

The order also states that the seized BTC will be transferred to Bitfinex, while any laundered funds will be subject to separate forfeiture processes.

To compensate for user losses from the Bitfinex hack, the exchange previously issued Recovery Right Tokens to affected customers. These tokens will be redeemed as part of the restitution efforts.

Moreover, 80% of the recovered funds will be used to buy back and burn UNUS SED LEO (LEO) tokens, a debt token created by Bitfinex after the 2016 hack. This buyback program is expected to take 18 months and has already triggered a 4% rise in LEO token prices.

While a significant portion of the stolen Bitcoin is being recovered, about 25,000 BTC remains unaccounted for after being subjected to advanced laundering techniques such as peel chains and mixers. These funds are now part of a separate forfeiture process due to the difficulty in directly linking them to the original theft.

Morgan and Lichtenstein were sentenced to 18 months and five years in prison, respectively, for their roles in laundering the stolen funds. The plea agreements also included the forfeiture of the seized Bitcoin, which was valued at around $4.5 billion at the time of their arrests.

The court’s decision sets an important precedent in recognizing crypto property rights, a matter that has been subject to varying interpretations in previous cases. This ruling may also influence future cases, including those involving customer funds from the collapsed FTX exchange.