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Bitcoin Exchange Bitfinex Completes Reimbursing Customers For 2016 Hack Losses

Last Updated March 4, 2021 4:55 PM
Lester Coleman
Last Updated March 4, 2021 4:55 PM

Bitfinex recently completed reimbursing customers who had suffered losses in its August 2016 hack and 119,756 bitcoins (approx $65 million at the time) looks forward to a stronger future. The reimbursement included the issuance of Bitfinex tokens (BFX) that served as a form of equity obligation to customers. The company yesterday noted on its website it would purchase tokens it issued those issued with US dollars.

Yesterday’s step marked the final redemption of BFX tokens released in August. No BFX tokens will remain outstanding; all will be destroyed.

The cryptocurrency exchange decided to take this step in response to a swelling in equity versions that delivered record results in March. The company also opted to reduce its reserves.

Bitfinex Thanks Customers

“We are tremendously grateful to all of our customers and new shareholders for helping us get to this point,” the company stated on its website. At week’s end, Bitfinex will advise shareholders what to expect in the coming months.

The company planned to settle outstanding margin positions, but the impact will be minimal since the BFX tokens trade closely to their face value.

The process for the final redemptions included:

• Pausing withdrawals, wallet movements, margin liquidations and automatic settlement of negative balances while the settlement process is running, a process estimated to last 25 minutes.

• An end of trading in BFX pairs.

• An end of lending in BFX.

• Cancellation of all BFX pair orders.

• Cancellation of all BFX lending orders.

• Force claiming of all BFX margin positions, even if users did not have sufficient correct collateral to complete this task. Negative balances could be temporarily created in some cases.

• Closing of active BFX loans and returning BFX to lenders.

• Replacement of negative BFX balances with the same negative quantity of USD.

• Redemption of any positive BFX balances for $1 per BFX token.

The company noted it is grateful for its customers’ and shareholders’ patience and trust in achieving full recovery in just eight months. Without the community’s support, Bitfinex could have ceased to exist.

Also read: Trading firm CEO: Bitcoin has emerged stronger from Bitfinex hack

Bitfinex Recovers From Hack

Since the Bitfinex hack, bitcoin capital markets have shown resilience and pricing risk is more realistic, according to Gavin Smith, CEO of trading and financial services firm First Global Credit who positively assessed the post-Bitfinex environment at the Capital Markets Blockchain Conference in London in September.

Markets have since returned to normal. The spread between USD and BTC deposit rates has changed. Prior to the Bitfinex hack, one could get a 15 to 20% return on USD rates to finance margin positions. After Bitfinex, bitcoin deposits dropped by 1.5% to 2%.

Featured image from Shutterstock.