US government crypto wallet hacked, $20 million: 2016 Bitfinex hacker asset movement

The US government's encrypted wallet, which confiscated assets from the 2016 Bitfinex cryptocurrency exchange hack, saw over $20 million in stablecoins and ether transferred to a new address on 10/24. Blockchain detective ZachXBT mentioned on Twitter that it could be a "theft" incident.

Aftermath of Bitfinex Hack: US Government Wallet Hacked for $20 Million

In 2016, due to issues with a multi-signature wallet, Bitfinex exchange was hacked, resulting in the theft of approximately 119,756 bitcoins, valued at around $8.1 billion at current prices.

In October 2023, the US government gained control of assets seized from the 2016 Bitfinex hack. These assets included stablecoins Tether, USDC, and Ether. However, on 10/24, a significant transfer occurred from the wallet, with over $20 million worth of crypto assets moved to a wallet address created just five days prior, as shown in this wallet address.

According to blockchain data firm Arkham, for the first time in eight months, a substantial amount of funds was transferred from the wallet. In this transfer, $1.25 million USDT and approximately $5.5 million USDC were moved out of Aave, followed by the transfer of these funds along with $440,000 worth of Ether and 13.7 million aUSDC to a new wallet address.

Crypto Detective ZachXBT: Funds Moved to Nested Exchanges for Theft

Crypto detective ZachXBT also commented on the incident on Twitter, stating that the fund transfers were "highly suspicious" and suggesting it could be a "theft" event.

ZachXBT also pointed out that the funds were subsequently moved in batches to other exchanges and wallets, as well as to "nested exchanges" that "rely on Binance for liquidity," as mentioned in this nested exchange post. This entire process is quite unusual.

Note: A nested exchange refers to a smaller exchange or platform that lacks sufficient liquidity to facilitate trading and relies on larger exchanges like Binance to provide liquidity. According to ACAMS, Nesting refers to the situation where a corresponding bank provides downstream remittance services to other financial institutions through its entrusted correspondent banks.

Subsequent Developments and Fund Flows; US Government Yet to Respond

Some of the transferred funds were converted to Ether (ETH) through the trading aggregator 1inch and moved in $40,000 batches to a suspicious Binance address. Currently, around $320,000 worth of Ether has been transferred to certain exchanges, while approximately $80,000 worth of Ether has been dispersed to other wallets. Following the incident, foreign media outlets have inquired with the US Department of Justice regarding whether the fund transfers are "related to enforcement actions," but as of now, the Department of Justice has not responded.

The Bitfinex hacker from 2016 strikes again, with nearly $100 million worth of bitcoins transferred from the implicated wallet.