Japanese crypto exchange firm gets a slap on the wrist

Wednesday, 31 Jan, 2018

260,000 users were affected, and the exchange said it would compensate to the tune of $425 million.

According to an infographic published by Rodgers Research, Coincheck holds the largest trading volume share over the last 30 days, a startlingly high 32%.

A $500m hack of Japan's Mt Gox exchange in 2014 forced it into bankruptcy and caused the price of bitcoin to crash.

At a news conference late Friday, the company said almost all of the NEM virtual currency held by its customers had been illicitly transferred out of the company's system at around 3 a.m. local time that day. According to the announcement, the refunds will be done using the exchange's own capital.

The company didn't share how the tokens were stolen.

Dressed in maid costumes and wearing wrestling masks adorned with fuzzy pom-pom ears and cryptocurrency symbols the eight Virtual Currency Girls are a pop music manifestation of the digital currency frenzy that has swept Japan and other parts of the world.

Therefore, the exchanges could offer services before being registered. The company has since halted withdrawals, deposits and trading of all currencies.

NEM's XEM token, the main victim of the hack, has since broadly recovered as markets begin moving on from the shock. Coincheck is still looking into exactly what happened.

However, Coincheck's registration with the government is still awaiting approval.

"Unlike fraudulent bank or PayPal transactions, theft of digital coins is very hard to trace and virtually impossible to revert", Kolochenko says.

Criminals had accessed Coincheck's platform at approximately 3am local time, but the breach was not discovered for another eight-and-a-half hours. Cybercriminals have been taking advantage of security weaknesses at young, often unregulated businesses that are handling huge sums of other people's money.

There are precedents when hacking has led to closing down of large cryptocurrency exchanges in the past as well.

Coincheck Inc., a Japanese cryptocurrency exchange that was hacked on Friday, resulting in the loss of around $400 million in NEM tokens, has promised to refund all of its affected customers.

Many exchanges have grown very quickly as trading has taken off but haven't focused on improving cybersecurity, Arslanian said.

Police were yet to make it clear whether the incident was an attack targeted at the trader's holdings of bitcoin, or whether it was a speculative raid.

Japan has taken a lighter touch. Similarly, in South Korea as well Youbit actually filed for bankruptcy due to hacking attempts and losing money in the a year ago.

Coincheck is likely to gain particular attention from Japanese authorities.