South Korea’s Crypto Exchange Coinrail Hacked With Up to $40 Million in Damages

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by Bhushan Akolkar · 4 min read
South Korea’s Crypto Exchange Coinrail Hacked With Up to $40 Million in Damages
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Coinrail reported that a cyber-intrusion caused some ERC20-based tokens being stolen from the exchange worth nearly $40 million.

On Sunday, June 10, a South Korean cryptocurrency exchange Coinrail officially announced on its website that it has been a victim of a hacking attempt. The website soon announced the suspension of all its services after what it termed to be a “cyber-intrusion” which has resulted in several ERC20-based digital tokens being stolen from its platform.

The Coinrail’s announcement read:

“At present, 70% of your coin rail total coin / token reserves have been confirmed to be safely stored and moved to a cold wallet and are in storage. Two-thirds of the coins confirmed to have been leaked are covered by freezing / recalling through consultation with each coach and related exchanges. The remaining one-third of coins are being investigated with investigators, relevant exchanges and coin developers.”

In the announcement, Coinrail also provided the names of those tokens which were stolen in the hack without disclosing the exact amount at stake, however. Some of these tokens include ATC from Aston, NPER project’s NPER token and the NPXS token from the Pundi X project. Later on Sunday, Pundi X was immediate in communicating to its investors through its official blog post that it is working in coordination with Coinrail and will update the token holders with further development. It said:

“The Coinrail team is now working with the Korean law enforcement to investigate the account holder involved in the unauthorized transactions. Once we get an update from Coinrail, we will update our token holders immediately about the development of this incident. We hope the incident will resolve soon.”

The sources familiar with the matter said that nearly $40 million has been lost in the cryptocurrency theft. In the last one year, a number of theft and hacking attempts on the South Korean exchanges have been reported. In July 2017, South Korea’s largest cryptocurrency exchange Bithumb reported getting hacked wherein data of 31,800 customers was compromised. Although the hackers couldn’t get direct access to the customer’s accounts, they could still manage to breach to get their personal information and “voice phish” some additional details from the customers in order to transfer digital currencies from them.

In December 2017, another South Korean exchange YouBit was attacked wherein 4000 Bitcoins worth a whopping $48 million were stolen. Later, YouBit closed its operations filing for bankruptcy.

Apart from South Korea, there have been multiple incidents of hacks on Japanese cryptocurrency exchanges since the beginning of this year. The biggest of them was the $500 million hack of Coincheck exchange wherein a huge amount of consumer data was compromised. The Japanese regulator has been seen taking some stringent measures since then to prevent any such incident in the future and thereby protect the investor’s interest.

Soon after the news of Coinrail hack came into the market, a negative sentiment was developed adding further woes to the already declining cryptocurrency market. Adrian Lai, founding partner at Hong Kong-based investment firm Orichal Partners said:

“Investors have been increasingly worried about cybersecurity issues. At this stage, obviously, the standard is not high enough.”

On Sunday, the cryptocurrency market witnessed a huge decline with the top 100 cryptocurrencies correcting in one-go. After two months, the price of Bitcoin yet again slipped below its crucial resistance of $7000 with other altcoins like Ethereum, Ripple, Bitcoin Cash correcting by more than 5-7% in one single day. More than $40 billion has been wiped off the crypto markets as the overall valuations have fallen below $300 billion.

Cryptocurrency researcher and analyst, Willy Woo has already predicted a slow bleed out from $7,500 to $6,500 and eventually to $5,500 citing reasons of high-volatility and low volumes in BTC trading. Woo said:

“I think we are gonna go to $5,500 – $5,700 next, I can’t see $7000 holding. Most likely we’ll balance a bit, then we’ll slide through. Long timeframes here, looking into June for the rough timing of this to play out at the best guess. Volatility is still too high. I’m looking for a sustained low band of volatility which tends to be a signal for the end of the detox and the next accumulation phase. It’s still got some time to ride down.”

Despite the majority of traders and analysts have justified the short-term price drop of BTC to the hack, it is inaccurate to allege that the hack of the exchange, which itself accounts for only about 5 percent of the volume coming from South Korea, caused the price of BTC and the entire market to fall.  If assumed so, this would mean that Coinrail, being responsible for less than 0.1 percent of the global cryptocurrency trading volume, could cause the market to collapse overnight. Would cryptomarket still exist if this was true?

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