Japanese Cryptocurrency Exchange Coincheck, Loses USD $530 Million In A Massive Hack

Japanese Cryptocurrency Exchange Coincheck, Loses USD $530 Million In A Massive Hack

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The hackers made away with more than 500 million NEM tokens, which at the time of the hack were worth approximately USD $530 million, as reported by Coincheck executives in a press conference.

In brief:

On January 26th, Coincheck, a major Japanese cryptocurrency trading exchange reportedly got hacked, losing 58 billion yen (USD $534 million) in NEM (XEM) tokens.

(TOKYO) — Coincheck, a major Japanese cryptocurrency trading exchange has become a victim of the biggest cryptocurrency exchange hack in history. According to Japanese media reports, the exchange has lost 58 billion yen (USD $530 million) in NEM (XEM) tokens.

The hackers made away with more than 500 million NEM tokens, which at the time of the hack were worth approximately USD $530 million, as reported by Coincheck executives in a press conference. However, Nikkei Veritas tweeted that until officials conduct a detailed investigation, it is difficult to estimate the exact amount of funds stolen. On January 26, the hacker had moved 300,000 XEM tokens to another address, and both addresses had been flagged with a mosaic warning to other exchanges to not accept the funds.

Till now, considering the percentage of the total cryptocurrency market cap at the time of the theft, Mt. Gox theft was the biggest cryptocurrency exchange hack in history with the approximate loss of 850,000 bitcoins, worth roughly $450 million at that time. But now, in purely fiscal terms the Coincheck hack is even more severe.

The Coincheck exchange on its website stated that it had suspended sales and withdrawals of the cryptocurrency, NEM, as well as restricted dealings in most other cryptocurrencies. The exchange executives also told that the hacker had not infiltrated multiple wallets but had only breached the exchange's NEM wallet and the other funds were safe. Coincheck is to be held responsible for the hack as NEM Foundation executives have said that the hack had nothing to do with the security of the XEM cryptocurrency itself.

Most of the well-known cryptocurrency exchanges rely on "cold wallets," to keep funds as they store funds offline and in secure locations because hacking has become rampant nowadays. Coincheck executives in a press conference told that all of the funds were stored in a hot wallet or an online wallet, which left user funds exposed to the security breach.

Coincheck, stated, "It was hard for us to manage the cold wallet," which is why the hack was so much larger than other recent cryptocurrency exchange thefts. Moreover, NEM's multisignature smart contract system, which adds an extra layer of security to the wallet, was not executed by Coincheck.

It was believed that to recover the funds from the hacker, NEM would activate a hard fork since the hack involved a huge percentage of the total number of XEM in circulation. However, unlike what Ethereum did following the DAO theft in 2016, Lon Wong, president of the NEM Foundation has said that he does not support a fork. He stressed that Coincheck's "relaxed" security measures, are to be blamed for the hack and there's no inherent flaw in the NEM source code.

Yuji Nakamura, a Tokyo-based Bloomberg reporter, said that Coincheck had not yet received an exchange license from Japan's Financial Services Agency (FSA). Looking at the severity of loss and Coincheck's poor security measures, it is to be seen what actions FSA will take against the exchange.

Coincheck, however, emphasized to continue operating and to compensate customers for their losses.

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