UAE- Hacked Tokyo cryptocurrency exchange to repay owners $425 million

Michele Moreno
January 31, 2018

We earnestly accept the terms of the order and vow to re-examine our business practices while simultaneously striving to make all facts involved in this case clear, discover the root cause of the breach, safeguard our customers, and develop stronger and more effective measures for system risk management and prevention of similar events in the future.

Japanese crypto exchange Coincheck is set to pay customers following a $400 million heist, according to a Bloomberg News report. The blame lies entirely with Coincheck and not with the NEM project.

Moreover, for NEM coins, the company had yet to install "multisignatures" - a security measure requiring several signoffs before funds can be transferred and a system recommended by the Singapore-based NEM Foundation, which created the currency platform. It said it has shown exchanges how to check if an account has been tagged to prevent stolen funds from being cashed or converted to other cryptocurrencies.

As such, most major digital currencies were in the red for much of Friday's trading session.

Nevertheless, the anonymity issues surrounding cryptocurrency trade are likely to be raised again by regulators who fear a rise in criminal acts involving digital exchanges. It has now suspended trading in all virtual currencies apart from bitcoin. The price of the XEM token recovered to nearly $1, according to Coinmarketcap.

"Had Coincheck used the NEM multi-signature wallet, this could not have happened", McDonald added.

"Unlike fraudulent bank or PayPal transactions, theft of digital coins is very hard to trace and virtually impossible to revert", Kolochenko says. Cybercriminals have been taking advantage of security weaknesses at young, often unregulated businesses that are handling huge sums of other people's money.

One reason why cryptocurrency markets have recovered quickly is due to Coincheck's prompt response.

Japan's Financial Services Agency (FSA), which rolled out a licensing requirement for the country's cryptocurrency exchanges previous year, ordered Coincheck to investigate the incident on Friday that caused the loss of $523 million worth of NEM coins from investor wallets. Mt Gox went bankrupt shortly afterward and affected users still haven't been compensated.

Cryptocurrency became one of the hottest sensations of 2017 when the value of bitcoin soared high.

Last month, South Korean bitcoin exchange Youbit filed for bankruptcy after being targeted by cybercriminals twice in the space of a few months. Coincheck suspended trading in all cryptocurrencies except Bitcoin on Friday.

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

Some countries have taken a tough approach.

Other reports by Insurance News

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