Criminals steal $60m from Japanese cryptocurrency exchange Zaif

Bitcoin
Japanese Bitcoin exchange Zaif has shut down transactions after a major hack Credit: Luke MacGregor Source: Bloomberg

Japanese cryptocurrency exchange Zaif has stopped users from depositing and withdrawing virtual currency after hackers broke into the system and stole $60m (6.7bn yen).

Zaif’s estimated that hackers stole 5,966 Bitcoins plus an unknown quantity of other cryptocurrency assets. Hackers accessed the exchange by breaking into a “hot wallet”, which are online, digital wallets used by customers to store cryptocurrency assets.

“It turned out some of the... hot wallets were hacked by unauthorised access from the outside, and part of the virtual currency managed by us was illegally discharged,” Zaif said.

The company detected server abnormality on Monday, and Zaif confirmed the hack the following day. Zaif confirmed that it has notified the authorities and is conducting an investigation to determine the full scale of the attack.

Zaif apologised for “betraying the trust” of customers around the world and said it is a “top priority” that customers’ information and money are not damaged.

“People don’t typically run into banks with guns any more, and Bitcoin is as vulnerable as other data that has a value,” said Terry Bishop, Technical Director at RiskIQ. “I think we will continue to see these hacks taking place.”

Cyber security start-up CipherTrace said that a record amount of cryptocurrency was stolen from online exchanges in the first half of 2018 amounting to $761m (£577m).

Since then, Bitcoin’s price came close to a six-month low after a South Korean cryptocurrency exchange suffered an attack.

The price of the digital currency fell by as much as 10pc after the Coinrail website confirmed an attack in which 30pc of its currency was stolen with an estimated value of 40bn won (£28m) in July.

Cyber attacks are a highly sensitive matter in the cryptocurrency world because of a notorious hack on the Japan-based exchange Mt Gox in 2013. Mt Gox handled around 70pc of the world's Bitcoin transactions at the time, and the hack, in which £251m of Bitcoin was stolen, led to a collapse in the cryptocurrency's price. A dispute over funds following the bankruptcy is still ongoing.

Cryptocurrency investors are also a target for hackers, who have little recourse if their electronic wallets are stolen. Earlier this week, MPs from the Treasury Select Committee stated that investors should be entitled to compensation.

If this move goes forward, this would give money invested in Bitcoin and other cryptocurrencies similar levels of protection as cash held in bank accounts or invested in the stock market.

Nicky Morgan, the committee chairman, said: “Bitcoin and other cryptoassets exist in the Wild West industry of crypto-assets. This unregulated industry leaves investors facing numerous risks. Given the high price volatility, the hacking vulnerability of exchanges and potential money laundering, the committee believes that regulation should be introduced.”

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