In my personal opinion, they should send them to @null, essentially burning the coins... If they do anything else, those coins are permanently tainted and any exchange that touches them can be held liable.
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I honestly don't think they can do that from a legal standpoint. Someone owns those coins, they just have to figure out who. It's possible those coins remained stuck for a long time until legal opinion can be given on the situation.
Bittrex own the coins ;)
Yes, but those coins are tainted, so they can't use or transfer them. Due to AML, all large sums are tainted by definition.
I believe I read somewhere that if coins are sent to bittrex with the wrong memo they are under no legal obligation to return them, but instead are treated as a donation. Now, I don't think for one second Bittrex will go that route in this particular situation, but it looks like legally, they could.
Bittrex technically has possession of the coins, but due to AML they can't declare them as donation as there is maximum number of transferable coins that is exempt from AML.
Basically any large amount of currency is by default assumed to be criminal in origin, unless proven otherwise... As the account where they were sent was accessed by someone other than intended user of the account, they can't possibly prove the legitimate origin of the coins.
I know it's unlikely that they do that, but for legal point, they actually can due to AML. If they transfer the coins back, they violate AML as those coins are tainted.