One of Japan’s largest digital currency exchanges says it has lost some $534m (£380m) worth of virtual money in a hacking attack on its network. Coincheck suspended deposits and withdrawals for all crypto-currencies except Bitcoin as it assessed its losses in NEM, a lesser-known coin.  If the theft is confirmed, it will be the largest involving digital currency.

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

The stolen Coincheck money was 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.  Coincheck says it has the digital address of where the money was sent and is going to do what it can to compensate investors.

What do we know about the Hack?  Hackers broke in at 02:57 (17:57 GMT) on Friday 26th January, the company said in a statement, but the breach was not discovered until 11:25, nearly eight and a half hours later. Company chief operating officer Yusuke Otsuka said 523m NEMs 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,” he said at a press conference at the Tokyo Stock Exchange.  Coincheck was still examining how many customers had been affected and trying to establish whether the break-in had been launched from Japan or another country.

“We know where the funds were sent,” Mr Otsuka added. “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.”  Coincheck reported the incident to the police and to Japan’s Financial Services Agency.

How damaging is the Loss?  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. Among the other crypto-currencies, Bitcoin dropped 3.4% and Ripple retreated 9.9% on Friday, according to prices seen by the agency. More was lost on Friday than in 2014, when MtGox lost what it thought was 850,000 bitcoins. However, MtGox later found 200.000 bitcoins in an old digital wallet.

After the collapse of MtGox shook the digital currency world, a licensing system was introduced in Japan to increase oversight of local currency exchanges such as Coincheck.

What is Coincheck?  Founded in 2012, the company is based in Tokyo, where it employed 71 people as of August last year. Its headquarters are located in the city’s Shibuya district, an area popular with start-ups that was also home to MtGox. Last year, Coincheck began running adverts on national television featuring popular local comedian Tetsuro Degawa, the agency adds.

Source: Cyber Security Intelligence

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