The story begins in 2016, when Bitcoin was valued at $575. At the time, Bitfinex suffered one of the biggest hacks in history, losing 119,754 bitcoins, equivalent to $68.8 million at the time and $7.6 billion today.
Bitfinex e Bitcoin
A document published on Tuesday (8) indicates that the US is ready to return 94,643 bitcoins, valued at R$32.8 billion, to the Bitfinex brokerage. The amount was recovered in early 2022, being the largest seizure in history, leading to the arrest of Ilya Lichtenstein and Heather Morgan.
While Lichtenstein remains under house arrest, Morgan was seen making the rounds at the Bitcoin 2024 conference in July, where she handed out stickers of herself topless astride a crocodile and introduced herself as a “web3 consultant.”
Regardless of the sentence given to the couple, what interests the market most is the fate of these tens of thousands of bitcoins that are about to return to circulation.
O hack da Bitfinex
This whole story begins in 2016, when Bitcoin was valued at US$575. On that date, Bitfinex suffered one of the biggest hacks in history when it lost 119,754 bitcoins, equivalent to US$68.8 million at the time and US$7.6 billion today.
As Bitfinex customers were affected by the theft, since the exchange was unable to honor 100% of the tokens, it decided to create a token called BFX. This token was a promise that users would be rewarded over time, allowing the company to continue operating.
The strategy worked. The full redemption of these tokens took place in April 2017 and today Bitfinex remains among the largest exchanges in the world.
However, the exchange continued to issue tokens. One of them is the Recovery Right Token (RRT), which is a promise to return any funds that are recovered. In 2021, for example, they managed to recover ~6.5 BTC, in addition to another ~27.6 BTC in 2019.
The third token created was UNUS SED LEO (LEO), currently the 17th largest cryptocurrency by market cap. Its value is justified by the terms described in its whitepaper.
“iFinex and its subsidiaries will use an amount equivalent to at least 80% of the net funds recovered from the Bitfinex hack to repurchase and burn LEO tokens in circulation.”
In other words, as the brokerage firm will recover R$32.8 billion in Bitcoin, after deducting expenses, R$26.2 billion must be allocated for this purpose.
US to return bitcoins to Bitfinex
While the US has auctioned and sold hundreds of millions of bitcoins throughout history, this seizure was different. That's because in other cases, like Silk Road, there was no victim to claim the coins.
Given this, the US has hinted that it is about to finally return the 94,643 seized bitcoins in 2022. The remaining ~25,000 bitcoins must have been spent by the hackers over the years.
“The Government is not aware of any person who qualifies as a victim under the Crime Victims’ Bill of Rights Act (CVRA) or for restitution under the Mandatory Victims’ Restitution Act (MVRA), other than perhaps Bitfinex, the Victim Cryptocurrency Exchange (“VICTIM VCE”), but seeks this relief out of an abundance of caution in order to provide notice to members of the public in particular, to former account holders of the exchange, and to give them an opportunity to present potential claims under the law.”
As the case has been widely reported in the media and no one has spoken out, it is hard to believe that another victim will now appear to dispute the case. Therefore, the return should happen soon.
What will happen to these bitcoins?
The big question is what will be done with these bitcoins. After all, the amount is large enough to create strong selling pressure or, at the very least, panic in the market.
Given this, the 20% that will remain with Bitfinex should not be spent. This is because the exchange is operated by iFinex, the same company that controls the stablecoin Tether (USDT), and is known for its belief in the appreciation of BTC in the long term.
Or another 80% would be exchanged for the UNUS SED LEO token (LEO). In the whitepaper, the exchange mentions a commitment to buy back and burn these tokens based on the recovered values.
The period for this to happen is 18 months from the date of recovery, so it should not have a major impact on the market due to this time. Legal expenses, government charges and other expenses will be deducted from this amount.
“For example, a partial recovery of 60,000 BTC at the current market price (1 BTC = approximately $5,000) would result in $300 million. After deducting $30 million (for the RRTs in circulation), $270 million would remain. Assuming that the $270 million were net recovered funds, iFinex would use at least 80% (i.e. at least $216 million) to burn LEO tokens.”
With the news, LEO rose 15% this Wednesday (9), but returned to its price of US$ 6 in the following minutes.
UNUS SED LEO (LEO) soared on publication of document by US authorities, but fell again. TradingView.
As of this writing, Bitfinex has not made any public statement on the matter.
Ultimately, the re-entry of these bitcoins into the market should have little to no impact on their price. At the time of writing, Bitcoin is trading at $61,770, down slightly by 0.6% over the past 24 hours.
