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Hacking of digital currency exchange leaves Japanese company footing the bill

Coincheck – one of Japan’s largest digital currency exchanges – says it will repay hundreds of millions of dollars’ worth of virtual money, after hackers broke into its network, stealing a reporting 58 billion yen (AUD660 million) worth of NEM (a cryptocurrency like Bitcoin).

Hackers broke into the Coincheck network early Friday morning, but it wasn’t discovered until nearly eight and a half hours later.

Coincheck Chief Operating Officer Yusuke Otsuka said the stolen funds had been kept in a “hot wallet” – a part of the exchange which was connected to the internet, rather than one secured offline. Coincheck said that this less secure method had been used to due to technical difficulties and a shortage of capable staff.  Not an inspiring excuse but one that underlines the need to consider the adequacy of providers in this field of digital currency – at least in the days of the “wild west” you could have a look at the bank’s vault before considering making a deposit.  It was also a little easier to gather a posse to chase the thieves!

Coincheck says that it knows where the funds were sent, and will continue tracking them to try and recover the funds, with the aim of returning around 46.3 billion yen (AUD523 million) to investors.

Japan’s Financial Services Agency has since sent a notice to the country’s virtual currency firms, warning them of further possible cyber attacks.

It comes after leaders at the World Economic Forum in Switzerland last week issued warnings about the dangers of cryptocurrencies, and the money being used for illicit activities.

Copyright 2019 K & L Gates

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About this Author

Cameron Abbott, Technology, Attorney, Australia, corporate, KL Gates Law Firm
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Mr. Abbott is a corporate lawyer who focuses on technology, telecommunications and broadcasting transactions. He assists corporations and vendors in managing their technology requirements and contracts, particularly large outsourcing and technology procurements issues including licensing terms for SAP and Oracle and major system integration transactions.

Mr. Abbott partners with his clients to ensure market leading solutions are implemented in to their businesses. He concentrates on managing and negotiating complex technology solutions, which...

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Allison Wallace, KL Gates, Commercial Technology and Sourcing lawyer, Australia

Allison Wallace is a lawyer in the Melbourne, Australia office of K&L Gates, working in the Commercial Technology and Sourcing Practice. 

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