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