The US Department of Justice (DOJ) has stated that around $9 billion in Bitcoin, taken from the crypto exchange Bitfinex in a 2016 hacking incident, ought to be returned to the exchange.

This claim arises from a legal document submitted by the DOJ, which indicated that there are no recognizable victims in this specific case within the existing legal structure.

Bitfinex To Potentially Reclaim Stolen Bitcoin

The court documents, submitted on Tuesday, explain that the recovery of the stolen Bitcoin—specifically 94,643 BTC, along with amounts from various hard forks—should be returned to Bitfinex. 

The DOJ argued that under the Mandatory Victim Restitution Act (MVRA), there is no legal basis to classify Bitfinex or its account holders as victims of the specific offenses for which the defendants were convicted.

The defendants, Ilya Lichtenstein and Heather Morgan, were convicted of Money Laundering Conspiracy, but crucially, they were not charged with the initial hack that resulted in the theft of the Bitcoin. 

According to the DOJ, their subsequent actions did not directly cause the losses incurred by Bitfinex. The legal definition of a “victim” as stated in the MVRA requires a direct and proximate harm resulting from the commission of a specific offense, which in this case reportedly does not apply.

Legal Challenges In Crypto Asset Recovery

The DOJ’s filing emphasizes that, while no mandatory restitution can be ordered under the current convictions, the court retains the authority to grant voluntary restitution. 

This means that, as part of their plea agreements, the defendants have agreed to return the stolen assets to Bitfinex. The restitution order proposed by the DOJ would encompass all funds recovered from the Bitfinex Hack Wallet.

While this ruling marks a potential financial windfall for Bitfinex, it also opens the door for further legal complexities. The government is in the process of a third-party ancillary forfeiture proceeding to address other seized assets linked to the defendants’ laundering activities. 

These additional assets, which were involved in complex laundering schemes, may not be categorized as specific property lost by Bitfinex and its account holders.

The 2016 Bitfinex hack, one of the largest in cryptocurrency history, has had lasting repercussions, leading to ongoing debates about regulatory standards and victim restitution in the digital asset space.

As this situation develops, the parties involved in the case will be focused on the court’s ultimate ruling about the return of the seized Bitcoin and its impact on the future of cryptocurrency regulation and restitution methods for future cases.

The DOJ’s efforts aim not only to address the financial losses experienced by Bitfinex but also to clarify the legal ramifications related to digital asset theft.

At the time of writing, Bitcoin has managed to regain its bullish momentum with a 4% rise in the past 24 hours towards the $99,100 level. 

Featured image from DALL-E, chart from TradingView.com

Over the past year, the Bitcoin Renaissance has brought significant attention to BTCfi, or “Bitcoin DeFi” applications. Despite the hype, very few of these applications have delivered on their promises or managed to retain a meaningful number of “actual” users.

To put things into perspective, the leading lending platform for Bitcoin assets, Liquidium, allows users to borrow against their Runes, Ordinals, and BRC-20 assets. Where does the yield come from, you ask? Just like any other loan, borrowers pay an interest rate to lenders in exchange for their Bitcoin. Additionally, to ensure the security of the loans, they are always overcollateralized by the Bitcoin assets themselves.

How big is Bitcoin DeFi right now? It depends on your perspective.

In about 12 months, Liquidium has executed over 75,000 loans, representing more than $360 million in total loan volume, and paid over $6.3 million in native BTC interest to lenders.

For BTCfi to be considered “real,” I would argue that these numbers need to grow exponentially and become comparable to those on other chains such as Ethereum or Solana. (Although, I firmly believe that over time, comparisons will become irrelevant as all economic activity will ultimately settle on Bitcoin.)

That said, these achievements are impressive for a protocol that’s barely a year old, operating on a chain where even the slightest mention of DeFi often meets with extreme skepticism. For additional context, Liquidium is already outpacing altcoin competitors such as NFTfi, Arcade, and Sharky in volume.

Bitcoin is evolving in real time, without requiring changes to its base protocol — I’m here for it.

After a rocky start, Runes are now responsible for the majority of loans taken out on Liquidium, outpacing both Ordinals and BRC-20s. Runes is a significantly more efficient protocol that offers a lighter load on the Bitcoin blockchain and delivers a slightly improved user experience. The enhanced user experience provided by Runes not only simplifies the process for existing users, but also attracts a substantial number of new users that would be willing to interest on-chain in a more complex way. In contrast, BRC-20 struggled to acquire new users due to its complexity and less intuitive design. Having additional financial infrastructure like P2P loans is therefore marking a step forward in the usability and adoption of Runes, and potentially other Bitcoin backed assets down the line.

The volume of loans on Liquidium has consistently increased over the past year, with Runes now comprising the majority of activity on the platform.

Ok so Runes are now the dominant asset backing Bitcoin native loans, why should I care? Is this good for Bitcoin?

I would argue that, regardless of your personal opinion about Runes or the on-chain degen games happening right now, the fact that real people trust the Bitcoin blockchain to take out decentralized loans denominated in Bitcoin should make freedom lovers stand up and cheer.

We’re winning.

Bitcoiners have always asserted that no other blockchain can match Bitcoin’s security guarantees. Now, others are beginning to see this too, bringing new forms of economic activity on-chain. This is undeniably bullish.

Moreover, all transactions are natively secured on the Bitcoin blockchain—no wrapping, no bridging, just Bitcoin. We should encourage and support people who are building in this way.

This article is a Take. Opinions expressed are entirely the author’s and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.