Losing $530 million: Tokyo-Based Cryptocurrency Exchange Hacked

Photo by: REUTERS

DIGITAL MONEY:  Coincheck, a major cryptocurrency trading exchange in Tokyo, has been hacked into and has lost about 58 billion yen ($534 million) worth of virtual money, national broadcaster NHK reported on Friday.

NEWS AGENCY REUTERS reported, Coincheck posted on its website on Friday afternoon that it had suspended withdrawals of almost all cryptocurrencies.

The exchange has already reported the incident to the police and to Japan’s Financial Services Agency, NHK said.

In 2014, Tokyo-based Mt. Gox, which once handled 80 percent of the world’s bitcoin trades, filed for bankruptcy after losing some 850,000 bitcoins - then worth around half a billion U.S. dollars - and $28 million in cash from its bank accounts.

Meanwhile Internatioal Business Times reported Coincheck, a Tokyo-based cryptocurrency exchange, confirmed Friday that it suffered a security breach that may have resulted in as much as $533 million worth of digital tokens being stolen from the platform.

In a press conference, Coincheck president Koichi Wada confirmed that about 500 million NEM tokens were stolen from the digital wallets maintained by the company. The exchange has halted its operations for the time being.

Coincheck first announced it was restricting the trade of NEM tokens but did not provide any additional details at the time. Subsequent updates that included halting all withdrawals from the platform.

It wasn’t until Friday evening local time that the company held a press conference to confirm it fell victim to a hack. According to local reports , Coincheck executives confirmed that about 58 billion yen (about $533 million) worth of NEM tokens were stolen from the platform—though the company admitted to not knowing the full extent of the breach yet.

Coincheck executives said they were exploring possible ways to offer compensation for affected customers, though details on how that compensation will be offered and to what extent it will cover the losses is yet to be seen.

In terms of sheer volume, the Coincheck breach represents the largest hack in the history of cryptocurrency, topping even the infamous Mt. Gox incident that resulted in 850,000 Bitcoins—then valued at about $450 million—being stolen.

Despite the amount of cryptocurrency stolen in the Coincheck incident, it seems unlikely it will have the same effect on the market as the Mt. Gox hack. NEM tokens have just a fraction of the market capitalization that larger cryptocurrencies have—about $7.6 million, compared to $186 billion for Bitcoin.

Still, the breach is unlikely to go totally unnoticed, as it raises fears for investors. Unlike a bank or financial institution that stores money, most cryptocurrency platforms offer little to no guarantee that a person’s money is secure while it is invested in a digital currency. Instances like the Coincheck hack may be few and far between, but remain a looming possibility.

According to www.theregister.co.uk, The attack was reportedly only discovered at 1.30pm, at which time CoinCheck suspended trading.

The ultimate cost of the attack will be tied to the trading value of NEM. With investors selling off the cyber-dosh following the attack, prices have fallen around 10 per cent, making the pilfered coins worth slightly less on the open market.

Apparently, the 523m coins – worth about half a billion dollars for now – were stored by CoinCheck on a remotely accessible hot wallet at the time of the computer security breach. The thieves were able to obtain the wallet's private key and move the currency out without setting off any alarms.


REFERENCES:

1. REUTERS
2. INTERNATIONAL BUSINESS TIMES
3. www.theregister.co.uk

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