Crypto Exchange Coincheck Promises Refund After $400M Hack

Announcements, Crime, News | January 29, 2018 By:

Japanese cryptocurrency exchange Coincheck, which on Friday lost over $400 million in cryptocurrency to a hack, said it will use its own capital to reimburse customers.

On Friday, Coincheck reported that about $400 million USD in XEM tokens have been stolen. The company said its XEM tokens were stored in a hot wallet instead of the more secure cold wallet, which is kept offline, because of technical difficulties and a shortage of staff capable of dealing with them. The private key of said wallet was acquired by the hackers, which allowed them to drain the funds.

On Sunday, the company said it will repay all 260,000 users impacted by the theft, at a rate of 88.549 yen (82 US cents) for each coin. “The timing of the reimbursement and the application process are currently under consideration,” Coincheck said. “The source of the refunded money is being carried out using our own capital.”

XEM is the native token of the NEM Foundation, a blockchain with a market capitalization of over $8 billion, making it the 10th biggest in the world at the moment.

The NEM Foundation said that there is no issue with its technology, and that the blame for the hack lies solely with Coincheck.

“As far as NEM is concerned, tech is intact,” said Lon Wong, president of NEM Foundation. “We are not forking. Also, we would advise all exchanges to make use of our multi-signature smart contract which is among the best in the landscape. Coincheck didn’t use them and that’s why they could have been hacked. They were very relaxed with their security measures.”

Jeff McDonald, vice-president of the NEM Foundation, said they don’t consider a “hard fork” to be an option because the NEM system is working correctly. The foundation has instead moved to “tag” the stolen coins, making them similar to banknotes with recorded serial numbers and thus hard for the hackers to use.

The tagging system will follow the stolen coins and tag any account that receives tainted funds. NEM said it has already shown exchanges how to check if an account has been tagged.