The Largest Theft in the Cryptocurrency History

On January 26, hackers cracked one of the largest crypto exchanges of Japan CoinCheck and stole more than 500 million NEM tokens from the accounts of 260,000 clients. The exchange representatives do not tell the exact amount of the theft. Such a hack casts some doubt on the security of all digital currencies.

The reason for the theft was the vulnerability of the CoinCheck exchange since the NEM tokens were not stored on "cold wallets", but on "hot ones", that is those which are directly connected to the Internet. President of the company Koichiro Wada justifies such an unsafe method of storing cryptocurrency with technical difficulties and staff shortages.

CoinCheck co-founder Yusuke Otsuka said during a press conference at the Tokyo Stock Exchange that the company did not know how the cryptocurrency had disappeared, but assured that they tracked the missing funds and hoped to restore them. Representatives of the exchange intend to make amends for lost funds. The clients will receive payments in Japanese yen. More than 90% of losses will be compensated at the company’s expense.

At the moment, all the operations with the NEM cryptocurrency, as well as withdrawal and deposit of funds are suspended. CoinCheck tries to improve cybersecurity and intends to develop an "automated labeling system" that will track all stolen funds from the exchange and will record the addresses of all the wallets on which the operations with these coins were conducted.

"It’s been long said that cryptocurrencies are a solid system, but cryptocurrency exchanges are not. This incident showed that the problem has not been solved at all. If Coincheck screws up its crisis management, that could deal a blow to the current cryptocurrency fever," believes the Japanese financial-analytical company NLI Research Institute.

by JustMarkets, 2018.01.28

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

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