When the Justice Department announced it seized billions in stolen cryptocurrency earlier this year, it seemed like great news for victims of a hack that drained around $70 million from customers' accounts on the Bitfinex trading platform in 2016.
"It was the biggest relief of my life," said Frankie Cavazos, who lost 15 bitcoins in the hack.
Over the course of the last six years, the value of the stolen crypto skyrocketed. At the time of the hack, a single bitcoin was worth less than a thousand dollars. Today it would be trading for around $20,000.
For Cavazos, getting his bitcoins back would be "a life-changing amount of money."
But so far thousands of victims like him haven't experienced the happy ending they were hoping for. Instead, they're embroiled in a battle over who is the legal owner of all that stolen crypto.
On the day the news broke that the funds had been recovered, Bitfinex publicly asserted that the stolen bitcoins should be returned to the platform in a statement: "Bitfinex will work with the DOJ and follow appropriate legal processes to establish our rights to a return of the stolen bitcoin."
That's because the company believes it's already made its customers whole by providing them with a variety of digital tokens that customers could sell in exchange for cash after the hack. A company spokesperson told CNBC that Bitfinex customers could have sold the tokens for cash and then used the cash to buy more bitcoins at the time.
The decision to offer customers tokens came after the company decided to generalize its losses across all account holders by 36%. That meant everyone who had a Bitfinex account lost 36% of their assets – not just users whose accounts were hacked.
The first token the company created was called a BFX token. Customers received one BFX token for each dollar they lost.
Bitfinex hack victim Frankie Cavazos
CNBC's "Crocodile of Wall St" YouTube documentary
Cavazos told CNBC he felt like Bitfinex just "dumped" those tokens on its customers and said he was not given the option to decline the BFX token.
He and several other Bitfinex hack victims spoke exclusively to CNBC for the documentary "Crocodile of Wall Street," which reports on the theft of the bitcoins and the alleged attempt to launder the stolen crypto.
One issue customers brought up to CNBC is that when they decided to sell their tokens they were actually worth pennies on the dollar.
"They pegged 'em to $1 per BFX token," Cavazos said. "They put 'em on the open market and it went from $1 to, like, 20 cents, so they were essentially allowed to basically FOMO everyone out of their debt."
Rafal Bielenia, who had 91 bitcoins on the platform said: "I sold those tokens as fast as possible immediately when they became available. And I was only able to get like 25% of their value." He believes, "there was no point in time that they refunded me – not in dollar terms, and not in bitcoin terms."
Bitfinex hack victim Rafal Bielenia.
CNBC's "Crocodile of Wall Street" YouTube documentary
For customers who didn't sell the tokens immediately, the company later gave BFX token holders a chance to convert their tokens into equity shares of iFinex, the corporate entity behind Bitfinex through other tokens the company created called RRT and LEO.
To put it simply, Bitfinex feels the customers have already been compensated fairly and if they chose to sell the tokens before their value reached a dollar, that was their choice to make. In a statement, the company told CNBC, "Upon receipt of the bitcoins recovered from the 2016 security breach, Bitfinex has pledged to use 80 percent of the proceeds to buy back and burn LEO tokens, after all RRTs are redeemed."
Essentially, Bitfinex wants the bitcoins that were stolen in the 2016 hack returned to the company and it will give a portion of that back to some of their customers in cash, not in bitcoins.
But some of the hack victims still assert the bitcoins belong to them. And the idea that they could lose their bitcoins not once, but twice, seems impossible.
"Why would anybody question that I should get my money back? That was my property," Bielenia said.
"I still am going to be trying to get ahold of these 15 bitcoins because I truly believe they are mine," Cavazos said. "I can prove it through the blockchain explorers."
Will Hogarth, who also had his crypto stolen in the Bitfinex hack, told CNBC, "I still expect my bitcoin back and I don't see any reason why they would keep it."
U.S. Deputy Attorney General Lisa Monaco told CNBC, "Victims, individuals and entities whose money, who claimed that's their money, that they were victimized by this money laundering scheme will submit claims ultimately to a court who will decide how that money is dispersed." However, no further details about that process have been released.
Booking photos for Heather Morgan and Ilya Lichtenstein.
Courtesy: Alexandria Adult Detention Center.
For now, the holdup seems to be that there has been no resolution in the court case involving the couple investigators say got caught holding the stolen cryptocurrency. Heather Morgan and Ilya Lichtenstein have been charged with conspiring to launder billions in bitcoin.
Morgan is an aspiring rapper who called herself "the Crocodile of Wall Street" and Lichtenstein a self-described "tech entrepreneur, explorer and part time magician." The duo is facing more than two decades in prison if they're found guilty. They have not yet entered a plea. CNBC reached out to Morgan and Lichtenstein to hear their side of the story, neither agreed to an interview. So far, no one has been charged with hacking Bitfinex in the first place.
As their case makes its way through the court system, a multibillion-dollar battle over what happens to the money is brewing.
"Ultimately, it's going to be a dog fight as to who gets this money. Whether or not the government gets to keep it, whether or not Bitfinex gets to keep it, whether or not the customers get it back -- anyone who tells you there's a clear answer is lying for their own benefit," said cryptocurrency attorney David Silver.
David Silver cryptocurrency attorney at Silver Miller
CNBC's "Crocodile of Wall Street" YouTube documentary
With billions of dollars on the line, Silver expects "people are going to spend hundreds of millions of dollars to get their hands on that pot of gold."
"I do think it's going to be a fight," Cavazos agreed,
"The end of this story -- we don't know yet," he said. "But you can't just simply walk away with a hack like this. There's someone that's going to be caught up in this that has to tell the truth and when that shoe drops, it's going to be really interesting and it's going to impact who gets the money."