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Digital Currency Exchange Coincheck Halts Withdrawals After $400 Million Hack

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Japanese digital currency exchange Coincheck has abruptly frozen withdrawals after confirming a major security breach involving NEM cryptocurrency.

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$400 Million Compromised

Coincheck confirmed on Friday that more than $400 million worth of NEM was lost after the tokens were routed “illicitly” outside the platform. The loss was originally reported at more than $700 million, possibly reflecting NEM’s fluctuating value throughout the day. Company officials said 500 million NEM tokens went missing. The incident has since been reported to Japanese authorities.

In a series of tweets, the Japanese exchange confirmed that it had halted withdrawals of NEM cryptocurrency. However, the restrictions appear to have been extended to other digital currencies as well, with the notable exception of bitcoin.

“All withdrawals from the platform are currently restricted, including JPY. Thank you for your understanding. We are doing our utmost to resume normal operations as soon as possible,” the company said on its blog.

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Coincheck has yet to confirm whether it has located the funds, and no perpetrator has been identified. The broker says it is now working to secure client funds across all digital assets.

The president of the NEM Foundation Lon Wong has apparently confirmed the theft, calling it the biggest the world had ever seen.

Although cryptocurrencies are legal tender in Japan, Coincheck is not registered with the country’s Financial Service Authority, raising concerns over whether the lost funds will be insured if the tokens cannot be retrieved.

NEM, the world’s tenth largest cryptocurrency by market cap, was down by as much as 18% Friday. At press time, prices had declined more than 7%, according to CoinMarketCap.

The selloff quickly spread to other cryptocurrencies, with bitcoin and Ripple XRP also reporting declines. The total market capitalization for all coins touched a session low of $506 billion, but has since recovered to around $549 billion.

Bigger than Mt Gox

The security breach is said to be the biggest in the history of blockchain, with the dollar amount likely greater than the amount stolen from Mt Gox in 2014. However, the impact on the cryptocurrency market will be much smaller given the immense growth of the digital asset class over the past 12 months.

Digital currency exchanges are prime targets for hackers and cyber criminals given the huge growth in coin valuations. Recent evidence suggests that criminals are also targeting ICOs in their attempt to capitalize on record inflows into blockchain startups.

Meanwhile, it has been reported that the U.S. Trrasury’s undersecretary for terrorism and financial intelligence has been pressuring Asian regulators to step up their oversight of digital currencies. Many blockchain firms and ICOs have already gotten the memo, and are introducing new KYC/AML standards into their platforms.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 161 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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2 Comments

  1. mvppvm_07

    January 26, 2018 at 7:11 pm

    In a world that does not yet understand the complexities of digital asset management (it never will, actually), any rogue theft will be blown into the night sky of ignorance. Legacy cynics of crypto will have a new whipping post to create more fear, uncertainty and doubt. As the industry continues to get more stable, the voices against it will get more strenuous. This theft helps both sides of that equation.

  2. flogy4031

    January 26, 2018 at 7:22 pm

    How do you think this will influence NEM?

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Skepticism Grows Over BitGrail’s Supposed $167 Million Hack

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A relatively unknown cryptocurrency exchange by the name of BitGrail has informed its users of a coordinated cyber attack targeting Nano (XRB) tokens. However, the incident does not appear to be holding up to scrutiny after the founder of the exchange made an odd request to the developers of Nano shortly after discovering the alleged theft.

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BitGrail Exchange Allegedly Compromised

The Italian exchange issued a notice to its clients last week informing them that 17 million XRB tokens were compromised in a cyber attack. The XRB token, formerly known known as Raiblocks, is valued at $9.80 at the time of writing for a total market cap of $1.3 billion. That puts the total monetary loss of the supposed heist at nearly $167 million.

Parts of the notice have been translated into English from the original Italian by Tech Crunch, a media company dedicated to startups and technology news. According to the agency,  BitGrail has stated the following:

“… Internal checks revealed unauthorized transactions which led to a 17 million Nano shortfall, an amount forming part of the wallet managed by BitGrail… Today a charge about those fraudulent activities has been submitted to the competent authorities and now is under police investigation.”

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The notice indicated that all transactions have been put on hold until authorities complete their investigation.

Very little is known about BitGrail, as it is not listed among the 183 exchanges whose volume is ranked by CoinMarketCap.

Suspicion Grows

Unlike other crypto heists, the circumstances surrounding the alleged BitGrail attack have been met with widespread suspicion. As David Z. Morris of Fortune rightly notes, this isn’t the first time BitGrail has suspended Nano withdrawals. The same thing happened in early January when the exchange halted not only Nano, but Lisk and CryptoForecast transactions as well.

The suspension was followed by an announcement that the exchange was taking measured steps to verify users and enforce anti-money laundering requirements. It was around this time that users became suspicious that BitGrail was going to cut and run with their tokens.

BitGrail founder Francesco Firano made an unusual request to the developers of Nano following the alleged attack: he asked them to fork their record, a move that would essentially restore the stolen funds.

Nano officially rejected the request on Friday, the day after Firano supposedly discovered the stolen coins. In a post that appeared on the Nano Medium page, the team said:

“We now have sufficient reason to believe that Firano has been misleading the Nano Core Team and the community regarding the solvency of the BitGrail exchange for a significant period of time.”

Last month, hackers made off with more than $400 million worth of NEM tokens stolen from Coincheck, a Japan-based cryptocurrency exchange. The coins have yet to be recovered and the perpetrators remain at large. In 2014, a cyber heist brought down Mt Gox, which was the world’s largest exchange.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 161 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Coincheck Hackers Are Trying to Sell Their Stolen NEM Coins

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The hackers behind the biggest crypto heist of all time are attempting to sell their stolen coins, according to an executive at the NEM Foundation. The revelations are the latest in a four-day saga that has authorities still struggling to identify perpetrators or locate the account in receipt of the stolen funds.

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Hackers Try to Profit

Jeff McDonald, Vice President of the NEM Foundation, said Tuesday that his organization had traced stolen XEM coins to an unidentified address. It was here that the thief tried to unload the stolen funds onto six online exchanges for the purpose of selling them. McDonald said the exchanges have since been notified.

It was not immediately apparent how many of the stolen coins were spent or even the whereabouts of the account. A spokeswoman at the NEM Foundation later said the attacker sent the cryptocurrency to several random accounts in 100-token increments.

Last Friday, the attackers made off with more than $400 million worth of NEM tokens from Japanese cryptocurrency exchange Coincheck. The monetary value of the heist has fluctuated several times over the past four days, reflecting regular price moves in NEM’s native XEM token. However, Coincheck said it would reimburse account holders at a rate of 81 U.S. cents per token, which reflects the average price between Jan. 26 and 27.

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Coincheck has been fined administrative penalties for failing to secure client funds. It was later revealed by the executive management team that the exchange failed to implement basic security features, such as multi-signature capability and cold storage. Rather, the XEM tokens were held in accounts connected to the internet.

Although the NEM Foundation is trying to prevent the liquidation of stolen funds, MacDonald said the attackers will likely get away with some of the money. However, the likelihood that they spend all of it is virtually zero given the market’s underlying liquidity constraints.

NEM Price Volatility

News of the heist on Friday triggered significant volatility in the price of XEM and the broader cryptocurrency market. Following a brief recovery, XEM has declined steadily over the past three days, with prices reaching new six-week lows on Tuesday. The coin touched a session low of 79 cents on volumes of more than $32 million. At press time, the coin was worth a little more than 80 cents.

Even with the decline, NEM held on to tenth spot in the global cryptocurrency rankings based on market cap. The coin’s overall value remains well north of $7 billion, according to CCN.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 161 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Coincheck Update: Exchange Announces Plan to Compensate 260,000 NEM Holders

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Japanese digital currency exchange Coincheck has announced plans to compensate hundreds of thousands of traders exposed to the recent theft of NEM (XEM) cryptocurrency. Roughly 523 million units of NEM were illegally redirected from the exchange early Friday, forcing management to suspend trading activity for all digital assets except bitcoin.

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Calculating Losses

Coincheck announced Saturday that 260,000 XEM holders were affected by the theft. The exchange plans to compensate them for their loss using a weighted average of volume, according to CCN. Volumes were calculated based on trading activity between 12:09 on Jan. 26 and 23:00 on Jan. 27 (Japan time). Based on this calculation method, the compensation amount for each unit of XEM will be 88.549 yen (81 US cents) multiplied by the number of units held.

Given the compensation amount, it can be assumed that the total loss of the heist was roughly $423 million.

Coincheck, which has apologized for the ordeal, says it is still investigating the matter further. During a press conference on Friday, the management team revealed several details about the exchange’s underlying infrastructure. According to media sources present at the conference, Coincheck admitted it had not integrated multi-signature technology or cold storage security, which would have held the tokens offline in a secure location. These capabilities are key selling points for most major exchanges keen on touting their security features. They are also considered necessary, albeit insufficient, in combating the growing threat of cyber criminals.

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The company’s management team has vowed to continue services once it concludes initial investigations. The exchange also said it will pursue registration with Japan’s Financial Services Agency (FSA), something it neglected to do prior to the hack.

Biggest of All Time

The heist of Coincheck has been described as the biggest the cryptocurrency market has ever seen, even surpassing the implosion of Mt Gox back in 2014. At the time, the theft of 85,000 bitcoins from the world’s biggest crypto exchange was a wake up call for regulators, market participants and service providers.

Unlike other modern-day cryptocurrency exchanges, Coincheck had severe security flaws that made it a prime target of hackers. According to analysts, storing the funds in a hot wallet connected to the Internet was the most serious flaw in the exchange’s setup.

The hack initially sent shock waves throughout the cryptocurrency market, with NEM and several coins suffering broad declines. As Hacked reported earlier, the value of NEM’s native token rebounded sharply on Saturday to trade well above $1.00. At press time, XEM was up more than 22% to $1.02.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 161 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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