Coincheck to start paying back victims of $500 million heist | Tech News

Coincheck to start paying back victims of $500 million heist

The hackers, who gained entry into Coincheck’s systems using malware on an employee’s computer, made off with about $500 million worth of digital tokens.

By: HIDEKI SAGIIKE AND YUJI NAKAMURA
| Updated on: Aug 19 2022, 21:53 IST
Coincheck said it will start compensating users who had their cryptocurrency stolen last month.
Coincheck said it will start compensating users who had their cryptocurrency stolen last month. (AFP)

Coincheck Inc. said it will start compensating users who had their cryptocurrency stolen beginning 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 Thursday.

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The hackers, who gained entry into Coincheck's systems using malware on an employee's computer, made off with about $500 million worth of digital tokens. That made it one of the biggest heists in history, raising questions about security of cryptocurrencies around the world. Since then, Japan's Financial Services Agency 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.

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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 Customers have withdrawn about 60 billion yen ($566 million) in cash since the incident, he said.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, chief executive officer, said the exchange made enough money from spread trading to fund the payback, which amounts to 88.549 yen for each of the 523 million stolen NEM coins.

Since the theft, NEM prices have plummeted and were trading at about 30 cents before Coincheck's announcement on Thursday. NEM prices rose as much as 7 percent after the exchange said it will start compensating users. Still, with NEM trading at such a steep discount since the January attack, that means the hackers now own a stash worth considerably less than what the victims stand to receive in compensation.

Earlier on Thursday, the Financial Services Agency ordered Coincheck to make further improvements and penalized 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 percent.

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First Published Date: 08 Mar, 18:29 IST
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