TOKYO—On Friday evening in Japan, one of the biggest virtual currency exchanges in Asia, Coincheck, announced that it had lost 58 billion units of the cryptocurrency NEM, worth roughly $530 million dollars, which may well be the biggest cryptocurrency heist in history.
For those of us with a long memory, the press conference was eerily reminiscent of Feb. 28, 2014, when Mt. Gox, once the world’s largest bitcoin exchange, declared bankruptcy and announced that it had lost over $500 million worth of bitcoins to hackers. (The figure was later revised down to $430 million.)
This new incident is an embarrassment to the Japanese government, which has been trying to make Tokyo the global center for cryptocurrency.
According to Coincheck at its press conference on Friday, and on its webpage announcements, hackers first broke into the firm’s NEM accounts at 2:57 a.m. Friday, local time, on Jan. 25.
The security breach went undetected, however, until almost 11:30 that morning.
According to sources close to Japan’s Financial Services Agency, hackers using overseas servers were able to disguise themselves as authorized users and enter the system. They then withdrew large amounts of NEM, spreading the withdrawals out several times during the eight and a half hours they went undetected.
Yusuke Otsuka, the chief operating officer of Coincheck, confirmed suspicions that the firm’s cyber security was subpar when, at the press conference, he admitted that the stolen currency had been kept on-line in a “hot wallet” rather than a much more secure offline storage facility known as a “cold wallet.”