Japan Based Coincheck, Crypto Hack Loss NEM of $400 million

One of Japan’s biggest cryptocurrency exchanges said that about $400 million in NEM tokens were lost after the coins were sent “illicitly” outside..

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One of Japan’s biggest cryptocurrency exchanges said that about $400 million in NEM tokens were lost after the coins were sent “illicitly” outside the venue, spooking investors in a country that’s still wary of digital-token exchanges four years after the collapse of Mt. Gox.

In a press conference at 23:30 JST (14:30 UST), the exchange's president Wakata Koichi Yoshihiro and chief operating officer Yusuke Otsuka estimated its loss at 58 billion yen (approx. $533 million).

Japan's Financial Services Agency announced it is "looking into" the loss, while most activities on the exchange were suspended Friday.

Coincheck said in a statement that the exchange is trying to ensure that consumer assets are protected.

How was coincheck hacked?
NEM stored on hot wallet, private key stolen. According to the exchange’s representatives, the hackers have managed to steal the private key for the hot wallet where NEM coins were stored, enabling them to drain the funds.

All the stolen money belonged to the customers of the exchange.

The ‘inappropriate’ movement of the funds was reported by Coincheck to Japan’s Financial Services Agency, as well as the police later on the same day.

Coincheck’s representatives have claimed that the security setup differs between various coins on the exchange.

While the company cannot currently disclose how many users were affected, they have expressed a desire to refund all the money that was lost.

Per the press conference, the “worst-case scenario” would be that the funds can never be returned.

Japan: Coincheck Exchange Freezes All Withdrawals As Up To $723 Mln Leaves Its Wallet Friday, Jan. 26.


Details of coincheck hack. How did coin check hack happened?

Will the funds get recovered?

Couple of things

  1. When the funds were moved out of coincheck, all the funds were in a hot wallet. That has an exposed API and an exposed private key. Coincheck should have been using NEM's multi-signature contract, would have probably saved them this theft event.
  2. Once the funds have been taken out of coincheck, they are now on a blockchain, and there is no way to go back in the history of blockchain and change the transaction. Where hard fork is not an option as NEM is designed to work that way. The only way to get the funds back would be a hard fork

We should all follow the best practices, users and exchanges. Time over time the hacks do happen.

If the funds were to be going to return, then hacker would have to return the funds back to coin check, else there is no way to get the funds back.

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