Following the enormous theft of 523,000,000 XEM (NEM), Japan based cryptocurrency exchange Coincheck has announced it will reimburse all impacted investors. At current exchange rates, this means Coincheck will need to pay out over USD $523 million to the estimated 260,000 impacted users. At the time of this writing, certain portions of the Coincheck site were not accessible throwing a cloudfront error.
Coincheck said all hacked accounts will be repaid via the Coincheck wallet. Funds will be in Japanese Yen (JPY). Coincheck said it would be using cryptocurrency exchange Zaif, operated by Tech Bureau Corp., for the calculation in XEM. Payouts will be calculated using the weighted average of turnover during a set period.
Coincheck issued a public apology regarding the cryptocurrency hack. The company stated;
“We are currently deciding on the best method for applying for reparations and the period in which they will be made. The principal used for reparations will be derived from company funds. We realize that this illicit transfer of funds from our platform and the resulting suspension in services has caused immense distress to our customers, other exchanges, and people throughout the cryptocurrency industry, and we would like to offer our deepest and humblest apologies to all of those involved. In moving towards reopening our services, we are putting all of our efforts towards discovering the cause of the illicit transfer and overhauling and strengthening our security measures while simultaneously continuing in our efforts to register with the Financial Services Agency as a Virtual Currency Exchange Service Provider. Thank you for your attention and your support.”
The size of the “illicit transfer of funds” topped one of the most famous Bitcoin hacks of all time. Mt. Gox experienced a theft of approximately $450 million in Bitcoin. While the hack was revealed in 2014, the theft actually took place over several years. The cryptocurrency exchange was the largest in the world at the time but the security breach led to its downfall.
Cryptocurrency exchanges are a regulated activity in Japan. Coincheck was reportedly not one of the platforms that was licensed by the Financial Services Agency. In light of the cybersecurity breach, it was reported that two cryptocurrency groups in Japan, Japan Block Chain Association and Tech Bureau, have joined to establish a new self regulatory organization. The reaction to the Coincheck hack seeks to establish a set of guiding principles to help restore trust to the nascent industry.