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Over five years ago, the cryptocurrency exchange Bitfinex (owner of Tether Limited as well) suffered what is still considered the second largest crypto-hack ever done. In August 2016, some unknown party started a series of unauthorized Bitcoin (BTC) transactions until drained 119,754 BTC from the exchange. Now, after all these years, authorities from the United States managed to capture two alleged perpetrators of the attack.

Back then, the stolen bitcoins amounted to about $75 million. However, with the time passed and several All-Time-Highs (ATH) in the middle, now they’re worth around $4.5 billion. The fortune was barely touched during the last years. The hackers managed to launder 25,000 BTC, but that was all.

According to the announcement by the U.S. Department of Justice (DoJ), a couple from New York would be responsible for the Bitfinex hack. Ilya Lichtenstein (34) and his wife, Heather Morgan (31), would have been trying to launder the proceeds from the robbery during the past five years.

Dark-side-NFTs-Laundering

They didn’t succeed, though, and the authorities seized over 94,000 BTC, or around $3.6 billion on January 31 —the largest seized amount by them so far. This was even when the couple used several methods to obscure their trace, as described in the official note.

“(They) employed numerous sophisticated laundering techniques, including using fictitious identities to set up online accounts; utilizing computer programs to automate transactions (…) depositing the stolen funds into accounts at a variety of virtual currency exchanges and darknet markets and then withdrawing the funds (…) converting bitcoin to other forms of virtual currency, including anonymity-enhanced virtual currency (…) and using U.S.-based business accounts to legitimize their banking activity.”

A conclusion for the Bitfinex hack?

The recovery of the funds might just be the beginning, though. For now, Heather Morgan was released on a $3 million bail, but her husband is still in prison. Chief Judge Beryl A. Howell of the Federal District Court ordered this because there’s a high risk of Lichtenstein escaping the country since he seems to be more involved in the hack than his wife. Both of them could get around 25 years in prison after trial.

But there’s a more interesting question remaining: who gets to keep the stolen BTC from the Bitfinex hack? They’re in power of the authorities now, but that couldn’t be forever… right? Indeed, that’s one of the options. After the hack, Bitfinex socialized the losses, so every single of its clients lost a certain amount and received Recovery Right Tokens (RRT) —sort of an IOU contract.

The victims could redeem those RRT at a rate of $1 per token or iFinex shares (Bitfinex’s parent company). By 2017, Bitfinex officially paid this debt to the victims, so, now they’re claiming the ownership of the stolen funds. As they indicated in a recent FAQ, the still owners of RRT will receive $1 per token as previously accorded, and not any of the stolen bitcoins.

Court ahead

Since the difference is very high, Bitfinex declared that will use 80% of the recovered bitcoins to repurchase and burn UNUS SED LEO, another token issued by the exchange. Of course, not everybody will agree with this, and it’s even unlikely that the exchange gets to keep the stolen funds. According to SFGATE, “only about one percent of federally seized property is returned to former owners”.

We’re probably about to see a long court battle to claim the property of the stolen bitcoins by several parts: the victims, the exchange, and the U.S. government. This is a great example of why it’s important to keep your private keys with you and use non-custodial exchanges, preferably.  


Featured Image by Kerstin Riemer / Pixabay


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Author

I'm a literature professional in the crypto world since 2016. It doesn't sound very compatible, but I've been learning and teaching about blockchain and cryptos for international portals since then. After hundreds of articles and diverse content about the topic, now you can find me here on Alfacash, working for more decentralization.

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