When the Justice Department announced it seized billions in stolen cryptocurrency earlier this year, it seemed like great news for the victims of a hack that drained around $70 million from customers’ accounts on the trading platform. Bitfinex in 2016.
“It was the biggest relief of my life,” said Frankie Cavazos, who lost 15 bitcoins in the hack.
Over the past six years, the value of stolen crypto has skyrocketed. At the time of the hack, a single bitcoin was worth less than a thousand dollars. Today it is trading around $20,000.
For Cavazos, recovering his bitcoins would be “a sum of money that would change his life”.
But so far, thousands of victims like him haven’t had the happy ending they were hoping for. Instead, they are embroiled in a battle over who is the legal owner of all that stolen crypto.
On the day news broke that the funds had been recovered, Bitfinex publicly asserted that the stolen bitcoins should be returned to the platform in a statement: “Bitfinex will work with the DOJ and follow appropriate legal procedures to establish our rights to a return of the stolen bitcoin.”
This is because the company believes it has already made its customers whole by providing them with a variety of digital tokens that customers could sell for money after the hack. A company spokesperson told CNBC that Bitfinex customers could have sold the tokens for cash and then used the cash to buy more bitcoins at the time.
The decision to offer tokens to customers came after the company decided to generalize its losses to all account holders by 36%. This means that everyone who had a Bitfinex account lost 36% of their assets, not just users whose accounts were hacked.
The first token created by the company was called a BFX token. Clients received one BFX token for every dollar lost.
Frankie Cavazos, victim of Bitfinex hack
CNBC’s “Crocodile of Wall St” YouTube documentary
Cavazos told CNBC he felt like Bitfinex just “threw” these tokens at his customers and said he had no option to refuse the BFX token.
He and several other Bitfinex hack victims spoke exclusively to CNBC for the documentary “Wall Street Crocodile” which reports on the theft of bitcoins and the alleged attempt to launder the stolen crypto.
One issue customers have reported to CNBC is that when they decided to sell their tokens, they were actually worth pennies on the dollar.
“They pegged them at $1 per BFX token,” Cavazos said. “They put them on the open market and it went from $1 to, like, 20 cents, so they were basically allowed to FOMO everybody out of their debt.”
Rafal Bielenia, who had 91 bitcoins on the platform, said, “I sold these tokens as fast as I could as soon as they became available. And I was only able to get 25% of their value.” He thinks that “there was no time when they refunded me – neither in dollars, nor in bitcoins”.
Rafal Bielenia, victim of the Bitfinex hack.
CNBC’s “Crocodile of Wall Street” YouTube documentary
For clients who did not sell the tokens immediately, the company then gave BFX token holders a chance to convert their tokens into shares of iFinex, the corporate entity behind Bitfinex through other tokens created by the company called RRT and LEO.
To put it simply, Bitfinex believes that customers have already been fairly compensated and if they chose to sell the tokens before their value reached a dollar, that was their choice to make. In a statement, the company told CNBC: “Upon receipt of bitcoins recovered from the 2016 security breach, Bitfinex has committed to use 80% of the proceeds to redeem and burn LEO tokens, once all RRTs will have been exchanged.”
Essentially, Bitfinex wants the bitcoins that were stolen in the 2016 hack back to the company and it will return some of them to some of their customers in cash, not bitcoins.
But some of the hack victims still claim that the bitcoins belong to them. And the idea that they could lose their bitcoins not once, but twice, seems impossible.
“Why would anyone wonder if I should get my money back? It was my property,” Bielenia said.
“I’m still going to try and get my hands on those 15 bitcoins because I truly believe they’re mine,” Cavazos said. “I can prove it thanks to blockchain explorers.”
Will Hogarth, who also had his crypto stolen in the Bitfinex hack, told CNBC, “I’m still waiting for my bitcoin and I don’t see any reason why they would keep it.”
Assistant U.S. Attorney General Lisa Monaco told CNBC: “Victims, individuals and entities whose money, who claimed it was their money, that they were victimized by this scheme money launderers will ultimately submit claims to a court which will decide how that money is dispersed”. However, no further details about this process have been released.
Photo booking for Heather Morgan and Ilya Lichtenstein.
Courtesy of Alexandria Adult Detention Center.
For now, the heist appears to be that there has been no resolution in the court case involving the pair of investigators who investigators believe were caught in possession of the crypto. stolen currency. Heather Morgan and Ilya Lichtenstein have been charged with conspiracy to launder billions of bitcoins.
Morgan is an aspiring rapper who went by the name “The Crocodile of Wall Street” and Lichtenstein, a self-proclaimed “tech entrepreneur, explorer, and part-time magician.” The duo face more than two decades in prison if convicted. They have not yet entered a plea. CNBC reached out to Morgan and Lichtenstein to hear their side of the story, neither agreed to an interview. So far no one has been accused of hacking Bitfinex in the first place.
As their case works its way through the court system, a multi-billion dollar battle over what happens to the money brews.
“At the end of the day, it will be a dogfight over who gets this money. Whether the government keeps it or not, whether Bitfinex keeps it or not, whether customers get it back or not – anyone who tells you there is a clear answer, it’s lying for your own benefit,” the specialist lawyer said. in cryptocurrencies David Silver.
David Silver Cryptocurrency Lawyer at Silver Miller
CNBC’s “Crocodile of Wall Street” YouTube documentary
With billions of dollars at stake, Silver expects “people to spend hundreds of millions of dollars to get their hands on that pot of gold.”
“I think it’s going to be a fight,” Cavazos agreed,
“The end of this story – we don’t know yet,” he said. “But you can’t just walk away with a hack like this. There’s someone who’s going to get caught up in this who has to tell the truth and when that shoe drops it’s going to be really interesting and it’s going to impact who gets the money.”
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Battle for Billions of Stolen Bitcoin Recovered in DOJ Seizure – Reuters
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