{"id":406368,"date":"2022-02-16T17:07:00","date_gmt":"2022-02-16T14:07:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/making-sense-of-the-bitfinex-bitcoin-billions\/"},"modified":"2022-02-16T17:07:00","modified_gmt":"2022-02-16T14:07:00","slug":"making-sense-of-the-bitfinex-bitcoin-billions","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/making-sense-of-the-bitfinex-bitcoin-billions\/","title":{"rendered":"# Making sense of the Bitfinex Bitcoin billions"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a40f99a4bb83\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a40f99a4bb83\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/making-sense-of-the-bitfinex-bitcoin-billions\/#Bitfinex_hack_2016\" >Bitfinex hack 2016<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/making-sense-of-the-bitfinex-bitcoin-billions\/#Recovery\" >Recovery<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/making-sense-of-the-bitfinex-bitcoin-billions\/#LEO_token\" >LEO token<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/making-sense-of-the-bitfinex-bitcoin-billions\/#The_DoJs_a_hodler_now\" >The DoJ\u2019s a hodler now?<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Making sense of the Bitfinex Bitcoin billions   <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-128018ef>It\u2019s the Netflix <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">script<\/a> that wrote itself. A story so outlandish, it\u2019s stunned the crypto community; an industry accustomed to apparent suicides in Spanish jail cells and nonfungible token auctions for dead rappers.<\/p>\n<p>The plot involves the United States Department of Justice (DoJ), a crypto exchange with a checkered history, a rapper-cum-Forbes magazine writer, a voucher to buy a new PlayStation, an occasional magician and $4 billion worth of Bitcoin (BTC).<\/p>\n<p>The alleged Bitfinex hack money launderers have kept the internet enraptured since the larger-than-life story emerged last week. It\u2019s no wonder that Netflix has actually announced that they will bring the story to life.<\/p>\n<p>In essence, a zany rapper who advises companies on <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">social<\/a> engineering and tackling cybercriminals named Heather Morgan and her cybersecurity specialist husband Ilya Lichtenstein were caught trying to launder funds stolen from the 2016 Bitfinex hack. Funds were <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/time.com\/6146749\/cryptocurrency-laundering-bitfinex-hack\/\">laundered<\/a> via the purchase of <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/game\/\" data-internallinksmanager029f6b8e52c=\"7\" title=\"Game\" target=\"_blank\" rel=\"noopener\">game<\/a>s consoles, Uber rides and other gift<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.elliptic.co\/blog\/elliptic-analysis-bitcoin-bitfinex-theft\"> vouchers<\/a>.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2022-02\/fea33878-ccf1-4588-bf1d-f9ed1b79a495.jpeg\" alt=\"\" title=\"\"><figcaption style=\"text-align: center;\">Morgan in a Lower East Side Manhattan art studio. Source: <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/HeatherReyhan\/status\/1473490465286729737\">Twitter<\/a><\/figcaption><\/figure>\n<p>Despite their nerdy credentials, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.justice.gov\/opa\/pr\/two-arrested-alleged-conspiracy-launder-45-billion-stolen-cryptocurrency\">according<\/a> to the DoJ report, law enforcement gained access to the couple\u2019s private keys through a cloud storage account. Yes, they kept their private keys to upwards of $3 billion in Bitcoin in the cloud.<\/p>\n<p>But, with so many unanswered questions and bizarre circumstances, the <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">news<\/a> of the Bitfinex billions has left Twitter scrambling for puzzle pieces while armchair investigators have their work cut out for them, coming up with even more outlandish theories.<\/p>\n<p>Amid wild theories and some questionable reporting, this article intends to lay out the established facts surrounding the Bitfinex hack and what it means now that the DoJ is now holding 90,000 Bitcoin.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Bitfinex_hack_2016\"><\/span>Bitfinex hack 2016<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The Hong Kong-based cryptocurrency exchange Bitfinex was hacked six years ago to the tune of $70 million. The attack was fast: In just two Bitcoin blocks spanning circa 20 minutes, Bitfinex wallets under the custody of Bitgo were drained of all their funds. In total, thieves stole 120,000 Bitcoin, now worth over $4 billion.<\/p>\n<p>As one of the biggest hacks in Bitcoin history, the hack caused a sharp selloff and the price per Bitcoin slumped to around $500. It\u2019s important to note that the money laundering couple, Morgan and Lichtenstein, are not accused of hacking the exchange, the hackers are still at large.<\/p>\n<p>The Bitfinex team worked tirelessly in response to the hack, devising an innovative solution to restore investor confidence. Initially, Bitfinex concocted and released BFX tokens and \u201crecovery rights tokens\u201d (RRT). While tokenization is common in 2022, in 2016\u201317, before the initial coin offering mania, the issuance of tokens was radical.<\/p>\n<p>The tokens served as an IOU to customers affected by the hack and could be redeemed for cash or exchanged for iFinex capital stock (iFinex being Bitfinex\u2019s parent company).<\/p>\n<p>Designed in such a way that Bitfinex could later buy back the tokens from users or offer shares in the platform to compensate, the BFX and RRT solution kept Bitfinex liquid and potentially \u201ccompensated investors faster than traditional proceedings.\u201d<\/p>\n<p>By April 2017, Bitfinex recovered enough funds to cover or reimburse all users affected by the hack eight months prior. Erik Voorhees called the recapitalization \u201cF*cking Amazing,\u201d Bitcoin podcaster Peter McCormack described the<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.whatbitcoindid.com\/wbd270-paolo-ardoino\"> process<\/a> as \u201csocializing the losses.\u201d<\/p>\n<p>The hack and subsequent quasi-fund recovery are in stark contrast to the infamous Mt. Gox hack of 2014, as Mt.Gox creditors exchange are only now discussing refund plans.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Recovery\"><\/span>Recovery<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Fast forward five years, and while some of the Bitfinex Bitcoin moved several times and was effectively laundered over time, law enforcement and blockchain enthusiasts watched the wallets like a hawk.<\/p>\n<p>Given the transparency of the Bitcoin blockchain, the hacked coins were blacklisted from crypto exchanges meaning that laundering the money would prove difficult.<\/p>\n<p>90,000 Bitcoin, roughly $3.6 billion, moved in early February. The DoJ was behind the move and the protagonists, Morgan and Lichtenstein, sprung into the spotlight. The DoJ\u2019s statement <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.justice.gov\/opa\/pr\/two-arrested-alleged-conspiracy-launder-45-billion-stolen-cryptocurrency\">explained<\/a> that:<\/p>\n<blockquote><p>\u201cSpecial agents obtained access to files within an online account controlled by Lichtenstein. Those files contained the private keys required to access the digital wallet that directly received the funds stolen from Bitfinex, and allowed special agents to lawfully seize and recover more than 94,000 bitcoin that had been stolen from Bitfinex.\u201d<\/p><\/blockquote>\n<p>As a result, the DoJ now has 94,000 Bitcoin in its possession. The repercussions of the U.S. obtaining so much Bitcoin are wide reaching from causing a potential Bitcoin price crash to questions regarding when, if and where the funds will be returned.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"LEO_token\"><\/span>LEO token<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>This is where the Netflix saga takes a breather and speculation takes over. The retrieved Bitcoin remains in a wallet, and while the money-laundering trial unravels, the token UNUS SED LEO (LEO) has mooned while commentators theorize on the stolen Bitcoin.<\/p>\n<p>As a small piece to the Bitfinex puzzle but a large part of the broader Bitfinex saga picture, the LEO token is another example of financial ingenuity. In 2019, the Bitfinex parent company iFinex listed LEO as an exchange utility token.<\/p>\n<p>The token granted traders lower fees and solved problems relating to iFinex\u2019 payments processors. Crucially, the token\u2019s 2019 <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.bitfinex.com\/wp-2019-05.pdf\">white paper<\/a> stated:<\/p>\n<blockquote><p>\u201cAn amount equal to at least 80% of recovered net funds from the BitFinex hack will be used to repurchase and burn outstanding LEO tokens within 18 months from the date of recovery.\u201d<\/p><\/blockquote>\n<p>In a bulletin made last week, Bitfinex <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.bitfinex.com\/posts\/766\">backed<\/a> the white paper claim, stating, \u201cBitfinex will, within 18 months of the date it receives that recovery, use an amount equal to 80% of the recovered net funds to repurchase and burn outstanding UNUS SED LEO tokens.\u201d<\/p>\n<p>Indeed, traders are banking on these funds returning to Bitfinex. The LEO token has soared, reaching new highs and jumping over 50%.<\/p>\n<p>Nonetheless, while Bitfinex may be confident of recovering the hacked Bitcoin, the DoJ has not disclosed the next steps.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_DoJs_a_hodler_now\"><\/span>The DoJ\u2019s a hodler now?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>As stated, the stolen Bitcoin <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.blockchain.com\/btc\/address\/bc1qazcm763858nkj2dj986etajv6wquslv8uxwczt\">remains<\/a> in a Department of Justice wallet. The blockchain wallet address holds 94,632 Bitcoin, with the last deposit received on Feb. 11.<\/p>\n<p>A wallet containing over 94,000 Bitcoin in 2022 is considerable: MicroStrategy owns 125,000 Bitcoin and Tesla holds 43,200. We can only assume that the DoJ has better opsec than the alleged money-launderers and will not store the keys in the cloud.<\/p>\n<p>The Bitcoin Treasuries Twitter<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/BTCtreasuries\/status\/1491199628301451266\"> joked<\/a> that they would add it to their list of Bitcoin treasuries, implying that the United States would become a holder of the retrieved funds.<\/p>\n<p>Binance CEO Changpeng Zhao<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/cz_binance\/status\/1491177938644918273\"> asked<\/a>, \u201cif they [Bitfinex] get the BTC back, how should they split that with LEO holder, or the people who took a loss to accept LEO at the time of the hack (and then sold LEO)?\u201d<\/p>\n<blockquote class=\"twitter-tweet\">\n<p lang=\"en\" dir=\"ltr\">Didn&#8217;t have time to research it in detail. 2 honest questions. <\/p>\n<p>Did bitfinex lose or make money from the hack?<\/p>\n<p>If they get the BTC back, how should they split that with LEO holders, or the people who took a loss to accept LEO at the time of the hack (and then sold LEO)? <\/p>\n<p>\u2014 CZ  Binance (@cz_binance) <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/cz_binance\/status\/1491177938644918273?ref_src=twsrc%5Etfw\">February 8, 2022<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>In an interview on the WAGMI podcast, Paolo Ardoino, the chief <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a> officer of Bitfinex, <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.listennotes.com\/podcasts\/wagmi-crypto\/bitfinex-bitcoin-hack-full-ezGiLHK1sQ3\/\">sounded<\/a> confident about regaining the funds. He said they are \u201cactively working on returning them (the funds) safely,\u201d adding that it may take some time.<\/p>\n<p>Ardoino stressed the importance of \u201cgiving back to the community\u201d and reiterated once again that Bitfinex will use 80% of the funds to buy back LEO \u2014 but it is unlikely to be a \u201cmarket buy.\u201d<\/p>\n<p>A securities fraud and investment loss attorney David Silver<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/dcsilver\/status\/1492262610997239810\"> said<\/a> that \u201cBitfinex is going to fight like hell to keep the money for themselves.\u201d<\/p>\n<p>Ultimately, though, he added, \u201cthe gov\u2019t will administer the redistribution.\u201d In a boon for privacy, the government may use the opportunity upon returning the funds to identify and consequently tax the original Bitcoin holders.<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"defi_newsletter\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more News articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/making-sense-of-the-bitfinex-bitcoin-billions\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Making sense of the Bitfinex Bitcoin billions &#8221; It\u2019s the Netflix script that wrote itself. A story so outlandish, it\u2019s stunned the crypto community; an industry accustomed to apparent suicides in Spanish jail cells and nonfungible token auctions for dead rappers. The plot involves the United States Department of Justice (DoJ), a crypto exchange&#8230;<\/p>\n","protected":false},"author":1,"featured_media":406369,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMDIvZTc2NjMwOGUtYzFiYS00ZGNkLTkwYmEtYTUzNjc4NDYyZjczLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74859,74862,74881,74894,74882,75269,74355,117,71391,1377,70934,10401],"class_list":["post-406368","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-aml","tag-bitcoin","tag-bitfinex","tag-blockchain","tag-hacks","tag-us-government","tag-adoption","tag-business","tag-department-of-justice","tag-netflix","tag-regulation","tag-twitter"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/406368","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=406368"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/406368\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/406369"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=406368"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=406368"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=406368"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}