Coincheck exchange promises to refund customers after $500 million cryptocurrency hack

midian182

Posts: 5,885   +48
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On Friday, one of the largest cryptocurrency exchanges in Japan was hacked and had around 500 million dollars’ worth of NEM coins stolen. Now, Coincheck Inc. has assured the 260,000 customers affected by the theft that it will refund them using its own money.

Based on total coin market cap, NEM is the tenth largest cryptocurrency right now. A total of 523 million coins were taken during the attack, but Coincheck is reimbursing owners who lost their digital assets, at a rate of 88.549 yen (82 cents) per coin. This is the average exchange rate for NEM during the period from when trading stopped to the release of the latest announcement.

“The timing of the reimbursement and the application process are currently under consideration,” Coincheck said in the statement, which arrived less than 48 hours after the hack. “The source of the refunded money is being carried out using our own capital."

Deposits and withdrawals for all cryptocurrencies other than bitcoin were suspended following the transfer of the coins to the hacker's address. Coinbase said it is still unaware how the incident took place, but we know the tokens were kept in an internet-connect “hot wallet” exchange, rather than being secured offline.

"We know where the funds were sent. We are tracing them and if we're able to continue tracking, it may be possible to recover them," said chief operating officer Yusuke Otsuka

The company said the amount it is paying back covers almost 90 percent of the stolen NEM coins’ worth, though no date has been set for when customers will receive their refunds. Coincheck is set to resume normal service and will continue its investigation to discover how the hack took place and patch the vulnerabilities that made it possible.

The theft is reportedly the largest in cryptocurrency history, beating the Mt. Gox incident that resulted in the loss of 850,000 bitcoins—200,000 of which have since been recovered—worth around $460 million at the time.

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psycros

Posts: 3,156   +3,293
But I thought this tech was unhackable. No? :confused:

BTW, where will the exchange be getting the 500 million for the refund? :confused:
It is unhackable, in the sense it can't be counterfeited. But can still be stolen. I don't see how they are going to repay it, possible insurance scam?
Very likely. I know if I was an unscrupulous, tech-minded high roller I'd be creating my own cryptocurrency and running the primary exchange via a dummy corp. Once I'd gotten about 25 mil worth of vaporcash in hand my exchange would get "hacked" with most of the coins being laundered right into my Swiss account.
 

Kenrick

Posts: 631   +401
But I thought this tech was unhackable. No? :confused:

BTW, where will the exchange be getting the 500 million for the refund? :confused:
It is unhackable, in the sense it can't be counterfeited. But can still be stolen. I don't see how they are going to repay it, possible insurance scam?
Very likely. I know if I was an unscrupulous, tech-minded high roller I'd be creating my own cryptocurrency and running the primary exchange via a dummy corp. Once I'd gotten about 25 mil worth of vaporcash in hand my exchange would get "hacked" with most of the coins being laundered right into my Swiss account.
Genius!
 

NimbusTLD

Posts: 107   +88
But I thought this tech was unhackable. No? :confused:
The part that is unhackable (so far) is unauthorised access to wallets - I.e. someone spending funds from a wallet to which they don't have the private key for.

In this case, an exchange was hacked, most likely due to poor security protocols. They could have been keeping the private key to their XEM wallet in a less than secure location, allowing the hackers discover it, and use it to send XEM from the exchange's wallet to their own. The NEM blockchain itself was not hacked.

This is why general advice is not to keep your cryptofunds on exchanges - they are responsible for securing your funds, for better or worse, and have huge targets on their backs.
 
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DaveBG

Posts: 496   +203
But I thought this tech was unhackable. No? :confused:
Its still unhackable. However yes, it still does not prevent theft if you happen to keep your money on the open web. If you come up with a way to prevent people of taking things left on the sidewalk you will get richer than the bitcoin crowd fast.
 
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