Bybit Hack Fallout Still Unfolding: Federal Law Enforcement Closes in on Web of Digital Currency Activity

input: Federal law enforcement is closing in on a web of digital currency activity linked to one of the largest crypto heists in history. Investigators have traced more than $35 million

Federal law enforcement is closing in on a web of digital currency activity linked to one of the largest crypto heists in history.

As part of a transatlantic operation, agencies are tracing more than $35 million in stolen Bitcoin connected to the February 2025 hack of Bybit, the huge exchange. The exploit, which had immediate repercussions on global markets, compromised an estimated $1.4 billion in cryptocurrency.

The digital trail has led to eXch, a crypto exchange accused of laundering funds on behalf of North Korea’s Lazarus Group.

eXch Announces Closure Amid Pressure

In an April 17 statement, eXch announced it will cease operations on May 1, citing a hostile regulatory environment and intelligence operations targeting its leadership. The exchange admitted to processing a portion of the hacked funds, describing the amount as “insignificant.”

“We’ve withstood pressure before,” eXch’s leadership wrote. “But operating under direct SIGINT [Signals Intelligence] pressure isn’t sustainable.”

Security analysts say the exchange was likely under surveillance for several weeks before the shutdown notice. Blockchain trackers flagged suspicious flows of Bitcoin tied to the Bybit breach, ultimately helping authorities trace some of the stolen funds to eXch.

“This shows how much more transparent crypto has become,” said one blockchain investigator. “If you move dirty money on-chain, we’ll find it.”

Aftereffects of Bybit Hack Still Unfolding

The Bybit hack, which involved the theft of various tokens including BTC, ETH, and LINK, sparked panic among crypto users. In the immediate aftermath, users pulled over $5 billion from the platform, fearing further breaches.

While Bybit assured customers it could absorb the losses, the company later shuttered parts of its Web3 division and closed its NFT marketplace.

As of March 20, nearly 89% of the stolen assets had been traced, thanks in part to a $2 million bounty program launched by Bybit. The effort rewarded tipsters who helped freeze stolen tokens before they could be laundered through smaller exchanges or converted into fiat.

Bybit has since recovered its pre-hack market share, regaining roughly 7% of global crypto volume by April 10.

Related: The Cost of Crypto: How a Quiet Finger Lakes Town Became Ground Zero in a National Energy Battle

Fed Sof tens Stance on Crypto Oversight

While enforcement efforts intensify, there may be regulatory relief ahead. Speaking at the Economic Club of Chicago, Federal Reserve Chair Jerome Powell said regulators could adopt a more open approach to digital assets in the near future.

“We’ve taken a conservative stance, especially after the wave of failures and frauds,” Powell said. But he added that the thinking on new entrants is changing, and a new phase is beginning.

Powell’s comments come as bipartisan interest in regulating stablecoins is growing on Capitol Hill, and Congress may soon take another look at a legal framework for crypto, which stalled in past sessions.

Any new policy must balance innovation with risk controls, especially as crypto becomes more intertwined with the traditional banking system, Powell said.

“The climate is changing,” Powell noted. “You’re seeing digital assets move into the mainstream.”

For more on how federal agencies are tackling digital fraud, read our report on new IRS scams targeting seniors.

Market Moves: Whales Shift $130M in BTC

Just as regulators and law enforcement ramped up scrutiny, blockchain analysts spotted two massive Bitcoin transfers to Coinbase on April 17 — totaling more than $130 million. The transactions, which occurred within minutes of each other, originated from the same anonymous wallet.

Analysts suspect the moves came from a single “whale” — a large-scale investor or institution — possibly preparing for a market repositioning. Such transfers often signal either an imminent sell-off or a liquidity move ahead of major news.

Despite the volatility, Bitcoin continues to hover near the $85,000 mark, showing unexpected resilience. But traders remain split: is the next move up, or is a correction coming?

Final Takeaway

The crypto world faces a turning point — where law enforcement, regulators, and major investors are all reshaping the industry at once. With the FBI chasing billions in stolen funds, the Fed opening the door to policy reform, and whales making bold moves, the pressure is rising across the board.

Stay with us for updates as the situation unfolds.

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