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Cryptocurrencies Rebound as Coincheck Promises to Reimburse $534 Million
THOMAS DELAHUNTY • JAN 28, 2018 •
Cryptocurrencies are rebounding following one of the largest cyber thefts in history, after the victim, Coincheck, confirmed that it will issue full refunds to the 260,000 users who lost funds. As a reminder: Japanese exchange Coincheck was hacked this past Friday (January 26th) resulting in a loss of 523 million NEM coins, worth approximately $534 million.
During a press release following the hack it was revealed by the exchange’s representatives that the funds were stored on a single-signature hot wallet, constituting a relatively low-security environment. The theft underscores security and regulatory concerns about Bitcoin and other virtual currencies even as a global boom shows little signs of fizzling.
According to Coincheck’s announcement, the refunds will be done using the exchange’s own capital — although the company is still considering the exact timing and methodology for the process. President Koichiro Wada announced that the compensation for each NEM coin will be $0.8147, which is the weighted average exchange rate during the period from when the trading was halted to the release of the latest announcement. Coincheck indicated that they are referencing the XEM/JPY exchange rate at Zaif, another Japanese exchange which has the most trading volume for XEM globally.
The cryptosphere has shown support for the exchange after its proactive actions following the hack — case in point, as of today NEM is up about 20%, trading at $ 0.9906 per coin. NEM is moving forward, too, with the development team behind the coin announcing that it is working on an automated system that will track the stolen coins and tag all addresses that receive the “tainted” money. This will permit any cryptocurrency exchange to blacklist the hackers’ accounts, preventing them from ever actually cashing out any illegally obtained tokens.
What’s also worth noting is that Coincheck has confirmed their intention to stay in business, as opposed to declaring bankruptcy, saying: ”Along with our ongoing efforts to file applications to be registered as a Cryptocurrency Exchange Service Provider with Financial Services Agency, we will continue business.” In 2014, Tokyo-based Mt. Gox, which once handled 80% of the world’s Bitcoin trades, filed for bankruptcy after losing around half a billion dollars worth of the coin. More recently, South Korean cryptocurrency exchange Youbit last month shut down and filed for bankruptcy after being hacked twice last year.