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A US court has mandated the return of $9 billion in stolen Bitcoin to Bitfinex, bringing hope to the crypto exchange and its users.
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Bitfinex aims to leverage 80% of these assets for the repurchase and burning of its LEO tokens, as part of a strategic recovery plan.
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Heather Morgan’s statement underscores the legal recognition of property rights in the crypto sphere, marking a pivotal moment for exchanges.
A landmark ruling allows Bitfinex to reclaim stolen Bitcoin, significantly impacting their recovery strategy and the broader cryptocurrency landscape.
Long Awaited Redemption for Bitfinex
The decision builds on an October filing in which both the convicted individuals, Heather Morgan and Ilya Lichtenstein, and iFinex, the parent company of Bitfinex, acknowledged that the exchange is the sole victim of the theft. Currently, the US government holds the seized Bitcoin. In January 2025, the court determined that Bitfinex and its users do not qualify as “victims” under the Mandatory Victims Restitution Act.
However, the judge approved a voluntary restitution agreement through plea deals. This agreement ensures that the exchange can reclaim assets connected to the hack, setting a significant precedent in the handling of cryptocurrency theft and recovery.
“The US government said bitcoin stolen in 2016 should be returned to Bitfinex. The hackers laundered 119,754 BTC in Aug 2016 – $71 million at the time. Now worth $11 billion. Clear ruling that property rights of crypto is recognised in the US. FTX customers should be treated the same,” said popular FTX creditor Sunil.
The restitution process includes all assets directly tied to the 2016 Bitfinex hack while funds laundered using complex methods will undergo a separate forfeiture procedure.
Moreover, Bitfinex account holders and other parties can challenge the restitution terms and file claims for the recovered funds. The deadline for submitting objections is January 28, 2025. The Department of Justice has also established a mechanism for individuals to identify themselves as affected parties and submit claims.
A Comprehensive Recovery Plan
Bitfinex confirmed its plan to redeem the remaining Recovery Right Tokens issued to users after the 2016 hack. These tokens were introduced to compensate affected customers by distributing recovered assets. The exchange previously announced in 2022 that 80% of any recovered funds would be used to repurchase and burn outstanding UNUS SED LEO tokens, a debt token created after the hack to offset customer losses.
The token buybacks are expected to occur over an 18-month period. The ultimate aim is to eliminate all LEO tokens from circulation. Following the latest developments, LEO tokens have gained nearly 4% in the past 24 hours.
LEO Daily Price Chart. Source: COINOTAG
Heather Morgan and Ilya Lichtenstein were convicted of conspiracy to commit money laundering and fraud. Morgan, who once advised businesses on cybercrime prevention, was sentenced to 18 months in prison, while Lichtenstein received a five-year sentence.
The recovery of an additional 25,000 Bitcoin remains more complex. Prosecutors stated that these funds were laundered using advanced methods such as peel chain transactions, non-compliant virtual currency exchanges, darknet markets, and mixers.
Due to these laundering efforts, the coins cannot be classified as the exact property stolen during the Bitfinex hack. Therefore, they will be handled through ancillary forfeiture proceedings.
Conclusion
This ruling represents a significant development in the realm of cryptocurrency regulation and recovery. As Bitfinex prepares to utilize the reclaimed funds strategically, it will not only bolster its position but also set a crucial precedent for other exchanges facing similar challenges. In an ever-evolving market, the recognition of property rights over cryptocurrency within the US legal framework may pave the way for more robust protections and recourse for investors moving forward.
