US Government Demands Return of 94K Bitcoin Stolen in 2016 Bitfinex Hack

The U.S. government stated that over 94,000 bitcoin stolen in the 2016 Bitfinex hack should be returned to the crypto exchange.

The U.S. government has stated that over 94,000 bitcoin stolen in the 2016 Bitfinex hack should be returned to the crypto exchange.

This was revealed in a filing submitted this week to the U.S. District Court for the District of Columbia, confirming earlier claims that Bitfinex was the sole victim of the theft.

The filing cites plea agreements with Lichtenstein and Morgan, who admitted to conspiring to launder 119,754 bitcoin stolen in the hack.

The 2016 hack involved the theft of 120,000 Bitcoin, now valued at over $12 billion. Lichtenstein and his wife, Heather Morgan—also known as the rap artist “Razzlekahn”— laundered the stolen funds using crypto mixers, layered transactions, darknet markets, and other techniques. The stolen assets represent the largest cryptocurrency seizure in U.S. history.

Following the pair’s arrest in 2022, authorities seized bitcoin valued at nearly $4 billion, marking the Department of Justice’s largest asset seizure to date.

The government argued that restitution should include the entirety of the seized assets, returning them to Bitfineix in kind. This aligns with the October 2023 position shared by Lichtenstein, Morgan, and Bitfinex’s parent company, iFinex, acknowledging the exchange as the sole victim.

Lichtenstein and Morgan, also known by her rapper alias “Razzlekhan,” pleaded guilty in August 2023 to charges of conspiracy to launder money. Lichtenstein received a five-year prison sentence, while Morgan was sentenced to 18 months in November. Before her arrest, Morgan offered advice on cybersecurity and social engineering tactics, a striking contrast to her later criminal activities.

In 2022, Bitfinex announced plans to use 80% of any recovered funds to repurchase and burn outstanding UNUS SED LEO tokens over an 18-month period to eventually remove all LEO tokens from circulation. This initiative followed the token’s issuance to mitigate customer losses from the hack. LEO has since gained nearly 4% in value over the past 24 hours.

Lichtenstein and his wife, Heather “Razzlekhan” Morgan, were arrested in February 2022 and charged with laundering the stolen bitcoins. He later admitted to being the original hacker behind the theft. Court documents reveal that the couple laundered 21% of the stolen bitcoins, using Eastern European bank accounts and other techniques to conceal the origins of the funds.

Prosecutors described the operation as one of the most intricate money laundering schemes encountered by IRS agents. They highlighted his calculated planning in breaching Bitfinex's systems and noted his past involvement in cybercrimes, including a $200,000 theft from another crypto exchange prior to the Bitfinex hack.

The U.S. government has indicated that it is not aware of any other parties that qualify for restitution but is proceeding cautiously to ensure no victims are overlooked.

After the August 2016 hack, Bitfinex allocated the loss among its customers by reducing all account balances by about 36% and issued a token to compensate for the losses. Token holders could sell their tokens on the market, redeem them at a fixed rate of $1 per token, or exchange them for shares in Bitfinex's parent company, iFinex.