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Privacy Tip #199 – Guard Your Cryptowallet: Cryptoheist in Japan Drains $32 Million From Exchange

The U.S. government continues to be wary of cryptocurrency, and presently, no cryptocurrency exchange is protected by the FDIC. When you put your money in a bank, if the bank becomes insolvent, but is FDIC insured, customers will not lose their deposits, usually up to a maximum of $250,000 per depositor per insured bank. But if you deposit your money in a cryptocurrency wallet, if it is stolen by cybercriminals, it is gone.

Unfortunately, cybercriminals are working very hard to steal cryptocurrency and are using crypto mining software to do it. We have alerted our readers to several instances where cryptocurrency accounts were stolen and wiped out by hackers [view related posts here, here, and here].

In the last week, another cryptoheist occurred in Japan. On July 12, 2019, the Japan based cryptocurrency exchange Bitpoint announced that it was hacked on July 11, 2019, and the hackers drained $32 million in from the exchange. Both “hot” and “cold” wallets were drained by the hackers. It was a big payday for the hackers and a cold, hard reality for Bitpoint and its customers. $23 million of the $32 million stolen was customers’ funds and the remainder was Bitpoint’s. Bitpoint shut down and suspended trading.

Cryptocurrency is not backed by the U.S. government and if it is stolen, customers’ only recourse is to go after the exchange. Once all of the funds are drained from the exchange, it will be difficult to get your money back. The Japan cryptoheist is another example of the importance of understanding the risk of investing in cryptocurrency and that it is not backed by the U.S. government.

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About this Author

Linn F. Freedman, Robinson Cole Law Firm, Cybersecurity and Litigation Law Attorney, Providence

Linn Freedman practices in data privacy and security law, cybersecurity, and complex litigation. She provides guidance on data privacy and cybersecurity compliance to a full range of public and private clients across all industries, such as construction, education, health care, insurance, manufacturing, real estate, utilities and critical infrastructure, marine, and charitable organizations. Linn is a member of the firm's Business Litigation Group and chairs its Data Privacy + Cybersecurity Team. She is also a member of the Financial Services Cyber-Compliance Team (CyFi ...