News, Software

Japanese exchange promises $423m refund after mass-breach

Coincheck has said it will refund over $400 million worth of virtual currency stolen from its network
Coincheck has said it will refund over $400 million worth of virtual currency stolen from its network

One of Japan’s largest digital currency exchanges has promised to refund most of the $534m worth of stolen virtual assets following a vast attack on its network.

Coincheck has promised to use its own funds to reimburse more than $423m to customers who lost their NEM cryptocurrency coins on Friday.

The Tokyo-based company suspended trading after detecting “unauthorised access” of its digital exchange.

Some 260,000 customers are said to be affected by the reported theft, and the breach could represent the largest attack ever involving digital currency.

The stolen Coincheck assets were said to be kept in a “hot wallet” – a part of the exchange connected to the internet. That contrasts with a cold wallet, where funds are stored securely offline.

Hackers broke in at 02:57 on Friday (21:57 GST on Thursday), Coincheck said, but the breach was not discovered until 11:25, nearly eight and a half hours later.

COO Yusuke Otsuka said 523 million of the cryptocurrency NEM had been sent from Coincheck’s NEM address during the breach.

“It’s worth 58bn yen based on the calculation at the rate when detected,” Otsuka said.

Coincheck was still examining how many customers had been affected, and was trying to establish where the break-in had been launched from.

“We know where the funds were sent,” Otsuka added. “We are tracing them and if we’re able to continue tracking, it may be possible to recover them.”

Coincheck reported the incident to the police and to Japan’s Financial Services Agency.

Coincheck froze deposits and withdrawals for all crypto-currencies except Bitcoin, as it assessed its losses in NEM.

It may be unable to reimburse the funds lost on Friday, a representative told Japanese media.

Another Tokyo exchange, MtGox, collapsed in 2014 after admitting that $400m had been stolen from its network.

NEM, the 10th-largest crypto-currency by market value, fell 11% over a 24-hour period to 87 cents, as of 18:30, Bloomberg news agency reports.

“In a worst-case scenario, we may not be able to return clients’ assets,” an unnamed Coincheck representative was quoted as saying on Saturday by Japan’s Kyodo news agency.

Founded in 2012, Coincheck is based in Tokyo, where it employed 71 people as of August last year.

Earlier, this month, Dubai-based blockchain startup ArabianChain launched its cryptocurrency exchange Palmex.

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