Another Japanese Cryptocurrency Theft

This entry was posted on Friday, September 28th, 2018.

A couple of months after the infamous heist that saw Coincheck lose around $534.8 million, another Japanese cryptocurrency exchange has fallen victim to theft. Zaif, an exchange owned by the Tech Bureau Corp based in Osaka, was robbed to the tune of $60 million in Bitcoin, Monacoin, and Bitcoin Cash. About 2.2 billion yen (around $19.47 million) of the stolen cryptocurrency belonged to the exchange, while the rest belong to its clients.

Virtual currency exchanges have suffered a string of major hacks this year, a major reason why professional money managers have avoided cryptocurrencies even as individuals have piled in. In addition to the Coincheck heist in January, 2018, there was also the Mt Gox $460 million debacle of 2014.

Japan’s regulators, who have rolled out a registration system for exchanges, have come under pressure to ensure that the crypto exchanges are secure. An estimate 12% of the world’s Bitcoin trades are paired against the Japanese yen, according to Cryptocompare.com. Japan’s Financial Service Agency (FSA) has asked the Tech Bureau to submit a report on the incident and plans to perform an on-site inspection of the company after receiving the document as early as Thursday, according to an un-named source.

After the Coincheck heist, Japan’s FSA ordered several exchanges, including Zaif, to improve operations in a crackdown that followed the Coincheck hack. Bitcoin’s value did not change much at $6,386 as of 12:13 pm Tokyo time, underscoring that crypto investors have become increasingly accustomed to cyber thefts. The current $6,386 represents a more than half decrease in value from its $19,783 peak at the end of 2017.

Tech Bureau pledges to compensate users who lost assets in the hacking, and immediately signed an agreement with a Fisco Limited unit aimed at receiving five billion yen (~$44.26 million) in financial support in exchange for selling the majority of the company. Tech Bureau did not give further details of how the hack happened, citing a criminal investigation that has been launched into the breach. Moreover, withdrawals and deposits were halted as Zaif rebuilds its system. As of late September, 2018, the exchange unable to say when it will resume.

The Bottom Line

The $60 million theft from Zaif is but the latest in a series of cryptocurrency heists in Japan, following the 2014 Mt. Gox cryptocurrency theft, and the Coincheck theft in January, 2018. Thanks to the volume and frequency of cryptocurrency thefts, it might not be far of a stretch to believe there is a correlation between investors growing increasingly reticent about investing in cryptocurrencies, along with the drop in prices from their 2017 peak. If crypto exchanges and cryptocurrency enthusiasts want to get serious about seeing cryptocurrencies remaining influential, they must work harder to make cryptocurrencies more secure.