Reading time: 3 minutes

On 2 August 2016, Bitfinex, the world’s “largest bitcoin exchange by US dollar volume” (according to was hacked. In the course of the Bitfinex hack, 120,000 bitcoins (equating to about $70m in value) was stolen from Bitfinex traders’ digital wallets.

What is Bitfinex?

Bitfinex is an exchange that allows users to trade between cryptocurrencies (the most well-known being Bitcoin) and government-issued currencies (mainly the US dollar).

It also facilitates peer to peer financing – and enforces the contracts entered into between “financing providers” and “financing recipients” by forced liquidation of trader’s accounts (if necessary).

Can Traders Affected by the Bitfinex Hack Obtain Compensation?

In an unusual move, Bitfinex has ‘socialised’ or ‘generalised’ the loss across its entire trader base. This means that Bitfinex reduced the value held in the digital wallets of all traders on its exchange by 36%.

Then, to compensate all of its traders for their loss, Bitfinex issued them with a new blockchain asset called “BFX tokens”. This asset can eventually be redeemed for value from Bitfinex or exchanged for shares in iFinex Inc, Bitfinex’s parent company based in Hong Kong.

In the meantime, traders can trade BFX tokens on the open market with an initial value of $1 each.

Can Traders Sue Bitfinex Instead?

Individual Bitfinex traders have the option of notifying Bitfinex that they don’t accept the compensation plan and commence legal action.

However, by commencing legal action, traders run the risk of forcing Bitfinex into liquidation. Liquidation may leave traders (as unsecured creditors) no better off and could even lead to a trading halt in the interim.

Without further information from Bitfinex on the terms and conditions for the redemption or conversion of BFX tokens, it seems to be too early to work out whether its compensation plan is a good one.

Accordingly, traders may elect to notify Bitfinex that they reserve their rights and that a delay in exercising a right does not constitute a waiver or acquiescence.

What are the Takeaways From This Incident?

When considering litigation, lawyers and clients alike must question its purpose –  what outcome can be achieved and at what cost. At present, it would be difficult to conduct a cost/benefit analysis for those affected by the Bitfinex hack.

Issues of strategic importance also need to be considered. Does an individual go public about the details of his/her investment in cryptocurrency exchange trades? Would information disclosed to a court by Bitfinex also make it susceptible to further hacks?

The right to pursue legal remedies is just one-factor parties must consider when entering into commercial dealings. Potential litigants need to weigh up their options to decide on the best outcome.


If you have any further questions or need help in any litigation processes, please contact one of our specialist disputes lawyers on 1300 544 755.


How Franchisors Can Avoid Misleading and Deceptive Conduct

Wednesday 18 May | 11:00 - 11:45am

Ensure your franchise is not accused of misleading and deceptive conduct. Register for our free webinar today.
Register Now

New Kid on the Blockchain: Understanding the Proposed Laws for Crypto, NFT and Blockchain Projects

Wednesday 25 May | 10:00 - 10:45am

If you operate in the crypto space, ensure you understand the Federal Government’s proposed licensing and regulation changes. Register today for our free webinar.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

Day in Court: What Happens When Your Business Goes to Court

Thursday 2 June | 11:00 - 11:45am

If your business is going to court, then you need to understand the process. Our free webinar will explain.
Register Now

How to Manage a Construction Dispute

Thursday 9 June | 11:00 - 11:45am

Protect your construction firm from disputes. To understand how, join our free webinar.
Register Now

Startup Financing: Venture Debt 101

Thursday 23 June | 11:00 - 11:45am

Learn how venture debt can help take your startup to the next level. Register for our free webinar today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer