Japanese Exchange Coincheck Says Hackers Stole Over $400M in NEM Cryptocurrency

| Updated
by Darya Rudz · 3 min read
Japanese Exchange Coincheck Says Hackers Stole Over $400M in NEM Cryptocurrency
Photo: Christopher Schirner / Flickr

Tokyo-based crypto exchange Coincheck suffered a loss of 58 billion yen as a result of a hack. 500 million NEM tokens were stolen. The exchange has temporarily stopped some services and is now working to remedy the consequences of the hack.

Tokyo-based cryptocurrency exchange Coincheck has confirmed that it has suffered the biggest theft in the history of cryptocurrency. According to Coincheck, 500 million tokens were taken from digital wallets, but the exchange is now working to ensure the safety of all assets.

After the hack, a press conference took place, where the exchange’s president Wakata Koichi Yoshihiro and chief operating officer Yusuke Otsuka estimated its loss at 58 billion yen (approx. $533 million at the time of theft).

After hours of speculation Friday night, Coincheck Inc. said the coins were sent “illicitly” outside the venue. Coincheck suspended all withdrawals, halted trading in all tokens except bitcoin, and stopped deposits into NEM coins. The incident leads to a decline in the value of XEM, the NEM protocol’s token.

Like bitcoin, NEM is a cryptocurrency built on top of blockchain, but it uses a more environmentally-friendly method to confirm transactions. Bitcoin mining requires significant computing power, while NEM does not.

The exchange posted several updates in a blog post and that announced that “certain Coincheck Payment features will be temporarily unavailable starting at 5 pm JST on 1/27/2018. The timeframe for full resumption of services is as of yet unclear. Users will still be able to login and access their dashboards during this period.”

Coincheck is a bitcoin wallet and exchange service headquartered in Tokyo, Japan, founded by Koichiro Wada and Yusuke Otsuka. It operates exchanges between bitcoin/ethereum and fiat currencies in Japan. It handles bitcoin transactions and storage.

Before this hack, Mt Gox has been carrying the torch for suffering the biggest crypto theft. The dollar amount stolen from Coincheck is likely greater than the amount stolen from Mt. Gox in 2014 (pegged at $340 million). However, the impact on the cryptocurrency market will be much smaller given the immense increases in market capitalization since.

Coincheck was not registered with Japan’s Financial Services Agency, but now the exchange is planning to do so. Coincheck’s president said he “deeply regretted” the issue. Coincheck expresses regret for this nuisance. “Please accept our sincerest apologies for this inconvenience,” the blog post reads. The exchange is also considering how to compensate its customers.

“We know where the funds were sent,” Otsuka said during the press conference. “We are tracing them and if we’re able to continue tracking, it may be possible to recover them. But it is something we are investigating at the moment.”

NEM Foundation President Lon Wong said on Twitter that his organization is doing “everything they can to help:”

Cryptocurrency exchanges are central targets for criminal activity right now, especially since bitcoin reached exponential heights at the end of last year.

“What’s the lasting impact? It’s hard to tell,” commented Marc Ostwald, global strategist at ADM Investor Services International in London. “Japan is one of the most pro-crypto trading countries, among the G-20. In Japan they don’t really want a wholesale clampdown. So it will be interesting how Japanese regulators respond to this, if they indeed do.”

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