US government says stolen bitcoin from 2016 Bitfinex hack should be returned to the exchange 'in-kind'

The U.S. government says over 94,000 bitcoin stolen in the 2016 hack of Bitfinex by Ilya Lichtenstein and Heather Morgan should go back to the exchange, in a court document filed this week. 

"For the foregoing reasons, there is no 'victim' for the specific offenses of conviction in this proceeding," the government said in a filing posted on Tuesday to the U.S. District for the District of Columbia. "However, the Court has the authority to order voluntary restitution pursuant to the defendants’ plea agreements. Such voluntary restitution should include all of the assets seized from the Bitfinex Hack Wallet and that, pursuant to the plea agreements, those assets should be returned to Bitfinex as in-kind restitution."

The latest filing is in line with an October court filing that said both Lichtenstein and Morgan, as well as Bitfinex parent company iFinex, believe that the crypto exchange is the sole victim . 

The pair, Lichtenstein and Morgan, who also goes by her rapper name “Razzlekhan," pleaded guilty in August 2023 to money laundering conspiracy in connection with the hacking of Bitfinex in 2016. The two allegedly conspired to launder 119,754 bitcoin tokens in August 2016, which at the time was valued at close to $71 million, according to the government. The 2022 bitcoin seizure from Lichtenstein and Morgan's devices was valued at nearly $4 billion at the time, which remains the DOJ's largest asset seizure to date.

In 2022, Bitfinex said that if it receives a recovery of the stolen bitcoin it would sell 80% of the recovered net funds to repurchase and burn outstanding UNUS SED LEO tokens, the debt token the exchange issued following the hack to help make up for customer losses. These sales would occur over an 18-month period. The goal is to eventually remove all LEO tokens from circulation. LEO is up nearly 4% in the past 24 hours.

Morgan was arrested with Lichtenstein last year and charged with conspiracy to commit money laundering and conspiracy to defraud the U.S. Notably, prior to her arrest Morgan also gave advice on how to protect businesses from cybercriminals and how to more effectively socially engineer — a hacking term — "your way into anything."

Lichtenstein was sentenced to five years in prison for his role and Morgan was sentenced to 18 months in November.