Coincheck to compensate users after $500m hack amid crypto-currency security questions
Tokyo — Coincheck said it will start compensating users who had their crypto-currency stolen starting as soon as next week, as the Japanese exchange seeks to resume more of its operations.
All of the 260,000 users impacted by the theft of NEM coins in the January 26 theft will be reimbursed, according to conversion rates detailed by Coincheck after the attack, the Tokyo-based company said at a news conference on Thursday.
The hackers, who gained entry into Coincheck’s systems using malware on an employee’s computer, made off with about $500m worth of digital tokens. This makes it one of the biggest heists in history, raising questions about security of crypto-currencies around the world. Since then, Japan’s financial services agency (FSA) has taken steps to crack down on exchanges. It still isn’t clear who was behind the attack, although there are signs that some of the funds are starting to show up on other exchanges.
Yusuke Otsuka, Coincheck’s chief operating officer, told reporters that the exchange has bolstered its security measures and is working to compensate users. Customers have withdrawn about ¥60bn ($566m) in cash since the incident, he said.
Two days after the hack, Coincheck announced it would use company funds to reimburse all of those who lost money in the theft. Koichiro Wada, CEO, said the exchange made enough money from spread trading to fund the payback, which amounts to ¥88.549 for each of the 523-million stolen NEM coins.
Since the theft, NEM prices have plummeted and were trading at about 30c before Coincheck’s announcement on Thursday. NEM prices rose as much as 7% after the exchange said it will start compensating users. Still, with NEM trading at such a steep discount since the January attack, it means the hackers now own a stash worth considerably less than the victims stand to receive in compensation.
Earlier on Thursday, the FSA ordered Coincheck to make further improvements and penalised six other exchanges. The government watchdog told Coincheck to revise its management structure, improve anti-money laundering procedures and submit a report by March 22. Otsuka said Coincheck will comply with the order.
The FSA has come under fire for allowing 16 exchanges, including Coincheck, to operate while they await a decision on their applications under a revised licensing system introduced last year. Coincheck said it would still move forward with its application to secure a license.
Bitcoin slipped to a low of $9,523 on Thursday in Tokyo, extending overnight losses, according to prices compiled by Bloomberg. They have since climbed back above $10,000. Rival tokens also slipped, with ripple, ether and litecoin declining at least 1%.