Bitfinex Proceeds US Government Controlled Wallets Breached

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Bitfinex Logo/Homepage

In 2016, the Bitfinex exchange was hacked. These funds were seized by the US government in 2022. In October 2024, their wallet was breached and the funds were relocated. The funds were returned the next day, suggesting that the US government was able to negotiate with the attacker successfully.[1][2][3][4][5][6][7][8][9][10][11][12][13]

About Bitfinex Hack

"The stolen funds were originally seized from Ilya Lichtenstein and Heather Morgan, who hacked the Bitfinex exchange in 2016, stealing around 120,000 Bitcoin valued at roughly $8.2 billion today. Both were arrested in 2022, and their case is now nearing sentencing, scheduled for November."

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

  • When the service was actually started (if different than the "official story").
  • Who actually ran a service and their own personal history.
  • How the service was structured behind the scenes. (For example, there was no "trading bot".)
  • Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - Bitfinex Proceeds US Government Controlled Wallets Breached
Date Event Description
October 24th, 2024 11:29:35 AM MDT First Withdrawal Transaction The first transaction happens on the ethereum blockchain, which disables the use of USDT as collateral on the Aave protocol.
October 24th, 2024 11:53:00 AM MDT Arkham Intelligence Tweet Arkham Intelligence tweets to initially report on the theft of funds.
October 24th, 2024 1:43:00 PM MDT Arkham Intelligence Tweet Arkham intelligence reports on the government wallet appearing to have been hacked for $20m.
October 24th, 2024 1:49:00 PM MDT ZachXBT Likely Theft ZachXBT comments on how this is likely theft due to the use of instant swap services.
October 24th, 2024 4:02:41 PM MDT CoinTelegraph Article CoinTelegraph published an article which details that the funds oriignally came from the Bitfinex exchange hack.
October 24th, 2024 10:06:00 PM MDT MistTrack Tweet Posted MistTrack posts a tweet with a breakdown of where the $20m worth of tokens went.
October 24th, 2024 11:18:32 PM MDT The Crypto Times Article The Crypto Times reports on the hack.
October 25th, 2024 7:49:35 AM MDT Return Of Hacked Funds The hacked funds start to be returned to the US government.
October 25th, 2024 9:03:59 AM MDT Government Transfers Funds The government appears to transfer the funds to another wallet with supposedly greater security.
October 25th, 2024 2:50:43 PM MDT Decrypt Return Of Funds Decrypt publishes an article reporting on the return of most of the funds to the original wallet.

Technical Details

"According to a MistTrack tweet, a suspicious outflow was detected from a wallet controlled by the U.S. government (0xc9E...34c): nearly $20 million was transferred to 0x3486ee700ccaf3e2f9c5ec9730a2e916a4740a9f, including: 5.4M USDC, 1.12M USDT, 13.7M aUSDC and 178 ETH. Most tokens were swapped into ETH. Approximately 19.3M worth of tokens were later returned to the U.S. government address."

"Suspicious Outflow from U.S. Government-Controlled Wallet (0xc9E...34c):

~$20M was transferred to 0x3486ee700ccaf3e2f9c5ec9730a2e916a4740a9f, including: 5.4M $USDC, 1.12M $USDT, 13.7M $aUSDC and 178 $ETH. Most tokens were swapped into $ETH.

-115.93 $ETH was transferred to #Binance(suspected nested exchanges). -63.65 $ETH was transferred to #N.exchange. -15.86 $ETH was transferred to #Switchain.

-549 $ETH remains in 0xbf6f7c503e858aded4e18ce2bcf93846fd726c15. -2,198 $ETH remains in 0x15d0a31ed5050ed8decd3c101aaee0b2ad2e6441. -13.19M $aUSDC remains in 0x3486ee700ccaf3e2f9c5ec9730a2e916a4740a9f."


Total Amount Lost

The total amount lost has been estimated at $21,390,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Total Amount Recovered

The total amount recovered has been estimated at $19,300,000 USD.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.

References

  1. ↑ @NFTCryptoBottle Twitter (Accessed Nov 15, 2024)
  2. ↑ @MistTrack_io Twitter (Accessed Nov 26, 2024)
  3. ↑ https://light.misttrack.io/s/nPrj0 (Accessed Nov 26, 2024)
  4. ↑ https://www.ccn.com/news/crypto/us-government-crypto-wallet-hacked-20m/ (Accessed Nov 26, 2024)
  5. ↑ @ErgoBTC Twitter (Accessed Nov 26, 2024)
  6. ↑ https://cointelegraph.com/news/us-government-crypto-hacked-arkham-intelligence (Accessed Nov 26, 2024)
  7. ↑ https://www.reddit.com/r/CryptoCurrency/comments/1gbwsgz/hacker_returns_193_million_to_drained_us/ (Accessed Nov 26, 2024)
  8. ↑ Hacker Returns $19.3 Million to Drained US Government Crypto Wallet - Decrypt (Accessed Nov 26, 2024)
  9. ↑ Hacker Drains $20M from U.S. Government-Controlled Wallet? (Accessed Nov 26, 2024)
  10. ↑ @ArkhamIntel Twitter (Accessed Nov 26, 2024)
  11. ↑ Ethereum Transaction Hash (Txhash) Details | Etherscan (Accessed Nov 26, 2024)
  12. ↑ Ethereum Transaction Hash (Txhash) Details | Etherscan (Accessed Nov 26, 2024)
  13. ↑ @zachxbt Twitter (Accessed Nov 26, 2024)
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