One of the world’s leading cryptocurrencies, NEM (New Economy Movement), was hit by hackers late last week in a remarkable attack that saw £380 million in cryptocurrency stolen.
Coincheck, one of the best known global crypto traders, has been operating since 2012 and runs the Tokyo exchange that was targeted. 260,000 people lost their NEM coins as a result of the incident, with around 523 million units of NEM estimated to have been taken from the online wallet system.
Cryptocurrency exchanges use different styles of digital wallets for transaction purposes. A ‘cold wallet’ is secure, offline storage for cryptocurrency with very limited staff access, as opposed to a ‘hot wallet’, which exists online. This is an active accumulation of wealth for quick transaction purposes and this was the target hit by the hackers. Trading was suspended after the attack, but the theft took almost eight and a half hours to detect.
In a press conference on Saturday, Yusuke Otsuka – Chief Operating Officer of Coincheck – said: “I deeply apologise to the customers we have troubled.
"We know where the funds were sent. We are tracing them and if we're able to continue tracking, it may be possible to recover them. But it is something we are investigating at the moment."
Coincheck have agreed to compensate customers almost 90% of the 58 billion Yen value of NEM coins that were lost, according to The Telegraph. The value given is the weighted average exchange rate during the period from trading being halted to the press conference, which works out at 88.549 Yen per coin.
This is the second biggest crypto ‘heist’ in history, narrowly behind the MtGox attack in 2014 – a hack that also took place in Japan. Bloomberg reported recently that with the rise in value of cryptocurrencies in the last 18-24 months, cyber crime surrounding cryptos has risen swiftly.
In August 2016 Bitfinex lost $65 million in Bitcoin. Almost one year later, CoinDash in Israel lost $6.6 million Ether on launch day. Later in 2017 Parity Wallet lost $155 million in Ether and Tether, a currency itself, lost $31 million. More recently, NiceHash in Slovenia had $63 million in Bitcoin stolen from their online wallet.
Surprisingly, the Japanese crypto market bounced back rapidly after this incident. After reporting initial losses of 11% to the value of NEM and slightly lower hits to Bitcoin and Ripple, the market resumed business as usual with steady growth across the market.