Date
25 September 2018
The cyber-heist at Coincheck is likely to prompt regulators around the world to step up scrutiny of cryptocurrency exchanges. Photo: Reuters
The cyber-heist at Coincheck is likely to prompt regulators around the world to step up scrutiny of cryptocurrency exchanges. Photo: Reuters

Cryptocurrency exchange Coincheck loses US$530 mln in hack

Coincheck, a cryptocurrency exchange based in Tokyo, announced that it lost about 58 billion yen (US$530 million) in customer assets due to a hacker attack, the largest such theft in the virtual currency world. 

The exchange, which was founded in 2012, said Friday that 523 million units of a virtual currency called NEM disappeared due to unauthorized access by someone outside the system, the Wall Street Journal reports.

Coincheck said it didn’t believe other cryptocurrencies traded on its platform such as bitcoin were missing.

However, it halted trading of currencies and withdrawals of yen for all customers, regardless of what assets they hold, saying it needed to investigate, the Journal reported.

At a late-night news conference in Tokyo, Coincheck CEO Koichiro Wada bowed in apology and said he will focus on helping customers recover their money.

“We are sorry for causing trouble,” Wada said.

The company said it discovered unusually large withdrawals of NEM early Friday local time but couldn’t say yet from which country or countries the unauthorized access came, according to the Journal.

Coincheck’s chief operating officer, Yusuke Otsuka, said at the news conference that he didn’t believe his exchange’s security level was low.

On Sunday, Coincheck announced that it will return about 46.3 billion yen (US$425 million) of the virtual money it lost to hackers, Reuters reports.

It said in a statement that it will repay the roughly 260,000 owners of NEM coins in Japanese yen, though it was still working on timing and method.

According to Reuters sources, Japan’s Financial Services Agency sent a notice to the country’s roughly 30 firms that operate virtual currency exchanges to warn of further possible cyber-attacks, urging them to step up security.

The financial watchdog is considering administrative punishment for Coincheck under the financial settlements law, a source was quoted as saying.

Coincheck said on Friday that its NEM coins were stored in a “hot wallet” instead of the more secure “cold wallet”, outside the internet. Asked why, CEO Wada cited technical difficulties and a shortage of staff capable of dealing with them.

The Coincheck incident marks the biggest-ever theft of digital money in the nine-year history of virtual currencies, topping the heist at Japan’s Mt. Gox exchange nearly four years ago.

In 2014, Mt. Gox, which once handled 80 percent of the world’s bitcoin trades, filed for bankruptcy after losing around US$450 million worth of bitcoin.

More recently, South Korean cryptocurrency exchange Youbit last month shut down and filed for bankruptcy after being hacked twice last year.

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RC

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