FBI Investigating The Theft Of 1.3m Bitcoin From Massachusetts Man

The FBI is working with Massachusetts police to recover funds stolen from a Bitfinex user, Coindesk reports. An unnamed Cambridge, Massachusetts resident filed a police report in September, shortly after the company encountered a $70,000,000 Bitcoin theft. The theft was reportedly tied to the initial Bitfinex breach.

Cambridge police took and filed the report but have since handed the case over to the FBI. According to Bitfinex representatives, a collaboration between the FBI and the Bitcoin exchange has already been established. “We are working with the FBI and European authorities on the investigation,” a Bitfinex employee wrote. No FBI spokesperson has made any comment as to how such an investigation would carry out.

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As Coindesk points out:

The incident report – and word that the FBI is looking into the matter – offers a rare detail into the post-hack investigation said to be taking place. However, the status of the investigation and the extent to which the FBI has pursued the lead remains unknown at this time.

The unnamed Cambridge resident claimed to lose funds beyond Bitfinex’s IOU tokens issued to victims of the breach. Specific details remain unclear. However, the individual claimed, in the incident report, that he noticed the theft of $1,300,000 in Bitcoin following the original Bitfinex breach. The user held $3,400,000 in a personal wallet hosted by the exchange

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Bitfinex notified the individual of his initial loss of approximately $1,300,000. The exchange, after the initial breach, issued users a form of “IOUs” to marginally compensate for losses. According to the report, the IOUs (BFX tokens) cut the user’s losses by a significant factor.

True losses are difficult to interpret due to the nature of the tokens; Bitfinex tokens were issued as an emergency measure to keep the exchange operating. Every user recieved tokens, regardless of the bitcoin balance held prior to the hack.

The token usability resides in a gray area; the exchange’s explanation of tokens is incredibly cloudy; and the legal status of the tokens is unknown. “The BFX tokens will remain outstanding until repaid in full by Bitfinex or exchanged for shares of iFinex Inc,” a post on the site explains. “The specific conditions associated with the exchange of these tokens will be explained in a later announcement,” a later update clarified.

A Reddit user asked for help using the tokens and the answer received is as follows:

Option 1: Do nothing and wait. Your BFX will automatically slowly turn into USD. This has been happening so far at a rate of 1.1-1.3% per month. This is supposed to rise after other people use option 3 below.

Option 2: Sell them on the exchange. You will receive whatever is the market value (around half). Do this if you cannot wait for option 1.

Option 3: IF you have 100k+ BFX, OR you have 1k+ BFX AND are an accredited investor, you can convert your BFX into company equity. Basically you’d be turning your BFX into shares in Bitfinex (it’s a bit more complex but that’s the basic idea). If you do not meet these criteria, you are limited to options 1 and 2.

The complexity of the IOUs potentially explain the somewhat convoluted police report.

No further details have been announced.

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