Digital Currency

Coincheck Says It Will Compensate Victims Impacted By Digital Currency Hack

Japanese digital currency exchange Coincheck promised all customers that they will compensate the 260,000 victims impacted by the digital currency heist. The Tokyo-based company lost 500 million XEM coins which at the time were worth $530 million USD (approximately $685 million CAD) from hackers on January 26th, 2018.

In a press conference held on March 8th, 2018, Coincheck’s CEO Koichiro and COO Yusuke Otsuka stated that the platform would reimburse their customers starting next week. Coincheck plans to compensate each stolen token at $0.81 USD (approximately $1.05 CAD) per token which amounts to almost $420 million USD (approximately $543 million CAD) for the 500 million XEM coins.

The two will also release further details of the process in the upcoming days. Coincheck will allow people to withdraw their digital currencies next week once they can ensure that it is safe and secure to do so. Despite the hack, Wada and Otsuka also plan to resume Coincheck’s operations next week as well.

Japan’s financial regulator, the Financial Services Agency (FSA) swiftly stepped in after the breach to investigate Coincheck and a variety of other exchange’s security measures. The FSA also worked with Coincheck to ensure they have the fiscal capacity to reimburse the victims of the digital currency hack.

NEM price plummets after Coincheck heist

While it is unclear how the hackers entered Coincheck’s system, officials suspected that someone infected an employee’s computer with malware that allowed them to gain unauthorized access to the company network, steal a secret code or passcode, and access 500 million XEM coins.

Since the theft, XEM’s prices have fallen significantly. They reached an all-time high at $2.09 USD (approximately $2.70 CAD) on January 4th, 2018 to a low of $0.30 USD (approximately $0.39 CAD) on March 8th, 2018 according to CoinMarketCap. After Coincheck’s announcement regarding the compensation of victims on Thursday, NEM prices rose seven percent.

NEM’s XEM coins, however, remain the world’s 13th largest digital currency by market capitalization. According to the NEM foundation’s blog post, they have been “actively working with Coincheck and other exchanges to ensure proper handling of this breach,” said Jeffrey McDonald, vice president of the NEM Foundation. “ Foundation will continue to provide updates as the situation unfolds.”

Avoiding another crash

Coincheck’s digital currency heist was one of the largest hacks in history. To prevent similar losses, the FSA has become extremely proactive with digital currency exchanges by suspending and penalizing those with poor security problems like FSHO and Bit Station for one month, effective from March 8th, 2018.

As for Coincheck, the FSA ordered the exchange to launch investigations into its security vulnerabilities. Coincheck also had to outline in a report how they would improve their security flaws. According to a report from Japan’s Nikkei index, “inappropriate management of system risks had become the norm at Coincheck.” The FSA wants to prevent the same behaviour that led to security vulnerabilities and a significant amount of XEM tokens stolen from the exchange.

Although Coincheck agreed to compensate their customers impacted by the digital currency heist, the FSA is now inspecting every digital currency exchange site to ensure that this event does not happen again.

Overall, Coincheck’s security vulnerabilities caused a large scale digital currency heist and a significant drop in NEM’s value. The Tokyo-based exchange is however hopeful of gaining a license from the FSA after receiving a business improvement order. They will also resume listing and trading digital currencies next week.

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Coincheck Says It Will Compensate Victims Impacted By Digital Currency Hack

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