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Japan's Zaif Bitcoin Exchange Delays User Refunds After $60 Million Cryptocurrency Theft
Zaif Delays Compensation Plan Following the $60 Million Cryptocurrency Theft
The operator of the Japanese cryptocurrency Zaif that lost $60 million worth of crypto to hackers, Tech Bureau, is yet to disclose a compensation plan for the customers who suffered loses a few weeks ago. The firm has already stopped new user registration in order to focus on reimbursing its customers who collectively lost Monacoin, bitcoin, and bitcoin cash from Zaif’s custody.
Zaif had promised to come up with a compensational framework, but later requested that it needed more time in order to finalize its strategy.
Infamous $60 Million Theft
The cryptocurrency theft happened on September 14, where Zaif’s hot wallets were infiltrated by unknown persons for two hours, making away with a cool $60 million worth of cryptocurrencies. However, the Tech Bureau didn’t learn of the theft until September 17, when it reported the matter to the Japan’s financial regulator, the Financial Services Agency (FSA). The breach was finally reveled to the public on September 20.
The cryptocurrency hack on Zaif is the second-biggest in Japan, after Coincheck crypto exchange was breached by hackers who made away with approximately $530 million worth of NEM earlier in January. Coincheck, however, outlined a compensation plan a day after the hacking incident, and started dispersing the funds on March 12 in Japanese yen.
Promise of Compensation
In what was seen as a move to appease Zaif’s users who suffered the loss, Tech Bureau said that it has entered into an agreement with Fisco Digital Asset Group, a publicly-listed Japanese corporation to help it make the compensations and in turn get a majority of shares by the exchange operator. It promised to give 5 billion yen ($449.59 million).
However, since then, it looks like the two companies haven’t quite agreed on the best way to roll out the compensation, and they are currently discussing the terms of stake deal.
Japanese Crypto Exchanges Updates on Zaif Hack and Bitflyer Organizational Changes
Recently hacked crypto exchange Zaif has stopped accepting new customers as regulators ramp up oversight of exchange operators. Bitflyer, the largest crypto exchange in Japan just announced a change in organizational structure. Japan Virtual Currency Exchange Association releases self-regulatory plans. Let us take a closer look at each of these news stories.
Zaif Crypto Exchange Stops New Membership Registration
Crypto exchange Zaif, one of the 16 regulated crypto exchanges in Japan, has suspended signing up new members. Zaif was hacked on Sept. 14 but the breach was not discovered until Sept. 17. The total damage is estimated to be about 7 billion yen (~$62 million). It is estimated that approximately 5,966 BTC, 42,327 BCH, and 6,236,810 MONA were stolen. The country’s Financial Services Agency (FSA) has issued the company a third business improvement order.
Zaif’s operator, Tech Bureau, announced Friday
“We decided to temporarily stop accepting new membership registration at 21 o’clock on September 28. Customers who are waiting for registration, such as being already in the process of identity verification by applying for membership registration, will register as usual as a member. We are responsible for recovering the damage to all existing customers who were victimized by the current virtual currency outflow, but to do so, [we need] to concentrate our internal resources.”
Bitflyer’s Change In The Company’s Organizational Structure
On Oct 1st, Bitflyer announced that they are going to change the company’s organizational structure. The firm announced. Bitflyer Inc., which operates Japan’s largest crypto exchange,
“Today marks the establishment of the holdings company, Bitflyer Holdings Inc., has become a wholly-owned subsidiary of Bitflyer Holdings Inc. by means of a stock transfer.”
In a joint statement, Bitflyer Inc. and Bitflyer Holdings Inc. clarified,
“Everyone will be able to use our services and trade just as they always have, The purpose for creating a holdings company is to separate administrative and operational functions, to clarify the duties and responsibilities of each function, to strengthen corporate governance, and to create a more thorough compliance structure.”
This June even Bitflyer Inc. paused new account registrations following the business improvement order by the FSA, the exchange explains.
“In order to maximize our efforts towards building a suitable service and improving on the issues identified, we have voluntarily and temporarily suspended the onboarding of new customers,”
Financial Services Policy: Assessments and Strategic Priorities 2018
On September 26th, the FSA published a report entitled Financial Services Policy: Assessments and Strategic Priorities 2018. The firm disclosed that based on data of 14 regulated crypto exchanges and three deemed providers obtained from the Jvcea, 81.6% of all crypto transactions going through these exchanges are “margin or future trading.” While, 18.4% are spot trading. Considered providers are exchanges that have been approved to work in Japan while their applications are still being evaluated by the company. Japan now has a total of three deemed providers: Coincheck, Lastroots, and Everybody’s Bitcoin.
Additionally, in the report, he FSA reveals that it will “Tighten registration screenings and monitoring, taking account of issues found in inspections,” “Review certification applications prepared by self-regulatory organizations and encourage them to achieve the early establishment of the self-regulating function,” and “Lead the discussion for global cooperation to form regulations as the chair of the G20 in 2019.”
Jvcea’s Self Regulatory Plans
This Sunday, it was reported that Japan Virtual Currency Exchange Association (Jvcea) “will set a ceiling on the amount of digital currencies managed online.” Members of the association are the 16 regulated crypto exchanges, including Zaif and Bitflyer. The group has filed for accreditation with the FSA to become an organization that can legally enforce self-regulation on its members.
The entity was founded in answer to the hack of Coincheck in January and has been working on achieving self-regulation. With the hack of Zaif, the group “plans to tighten self-regulatory measures it follows on the management of customer assets.”
NEM XEM Token Remains Uncompromised Despite Zaif Exchange Hack
Barely a week after the hacking of the Zaif digital currency exchange, the NEM Foundation, through its official Twitter account, proclaimed that they were safe from the attack. The tweet further revealed that the NEM blockchain network, along with NEM Mobile and Nano wallets were not affected by the breach. NEM is a blockchain-driven nonprofit asset management solution.
Speaking on the matter, Alexandra Tinsman, the spokesperson of the NEM Foundation, said that the Zaif hack should be a reminder to crypto investors that they need to prioritize the security of their digital assets, even though the breach was unfortunate. In this regard, she encouraged users to implement multi-factor authentication in their wallets or simply invest in impenetrable hardware wallets. Tinsman concluded by informing investors that activities on the Zaif exchange are temporarily suspended as the platform is currently conducting investigations concerning the cyber-attack.
As of now, there is on official confirmation regarding damages inflicted on NEM. However, the Zaif crypto exchange has confirmed that BTC, BCH, and Monacoin were affected by the hacking incident. The immunity of NEM’s digital currency (XEM) to such attacks is attributed to the implantation of a Multisig security mechanism.
Initially, on September 17, the Zaif exchange is said to have noticed an anomaly in its servers. Upon further examination, the effects of the hack were uncovered on the following day. At the time, the treasury department was evaluating the reason behind the unusual server behavior. Since the attack was a criminal case, executives of the trading platform have forwarded the report to law enforcement agencies who are currently doing investigations. This move is aimed at preventing the recurrence of similar incidences.
Allegedly, XEM trading is still active on the Zaif exchange, although other virtual currencies such as Monacoin, Bitcoin and Bitcoin Cash are still suspended, at least for now.
Previously, NEM has been hacked on the Coincheck trading platform. As per the company, the attack was a result of the company's negligence in the enforcement of adequate security measures. The firm has already filed a report with relevant authorities and is presently awaiting the results of the investigation process.
Zaif Crypto Exchange Suspends New Registrations After Recent Hack Exploit
Zaif Bitcoin Exchange Discontinues New Registrations After Getting Hacked
The owner of Zaif exchange, Tech Burea Inc suspended registrations of new accounts on the exchange’s trading platform for a short while. This decision was made on the 28th of September, 14 days after the exchange was hacked and led to the loss of more than $60 million worth of digital currency. Zaif owners said in a press statement that new registrations would resume once they come up with a workable strategy of compensating their clients.
Tech Bureau Inc has approached Fisco, another investment management company from Japan seeking $44 billion bailout agreement. This agreement aims to back client’s assets. However, according to a new report on October 1, the deal is still being examined.
In a statement, Tech Bureau said that after they have concluded the basic agreement, they are now moving forward to negotiations and consultations to conclude the official contract. The company maintained that there are no changes to the policy that will ensure full compensation of the client’s assets. The two are still in the process of considering the details of the expected responses. They continued saying that they will release the details of the full agreement as soon as it is confirmed by both parties.
With the reimbursement discussions proceed, Zaif says that it is important to restrict new customers from signing up with the exchange. Tech Bureau maintains that the suspension will not have any negative effect on the current clients including those with their identity verifications still open.
FSA Begins Investigations
The Financial Services Agency (FSA) of Japan said that it has launched its investigations on Zaif’s security practices. At the moment, FSA is examining the user protection systems that Tech Bureau has installed in their offices.
The agency had already served the Bitcoin exchange with two consecutive warnings in March and June, that they were to improve on the security of their operations. Tech Bureau was not the only one served with these warnings. Other exchanges had also been issued with similar advisory following the hacking of Coincheck that saw it lose $509 million in January.
Japanese police in their investigations have unearthed more than 160 digital currency heists amounting to about $532 million as from January to June this year. The bigger heists received much more attention than the smaller ones but the agencies have not been able to recover any of the stolen wealth.
In a bid to prevent authorities from recovering the stolen funds, hackers have remitted them to offshore accounts. Considering that the wallets in these cases have not been through KYC/AML guidelines, it will be extremely difficult for the Japanese police to get any of the stolen digital assets.
BlockTrace Identifies Zaif Crypto Exchange Stolen Funds Wallet Address, some Bitcoin Ends Up On Binance
Stolen Funds From Zaif Exchange Ends Up On Binance
Yesterday, BitcoinExchangeGuide had reported that Japanese Crypto Exchange had suffered $59 Million in loses after a reported attack. Today, there has been massive development on this issue. It seems like some of the stolen Bitcoins has ended up on Binance.
The announcement comes from BlockTrace, who are a blockchain forensic and analytical services provider specializing in virtual currency investigations, asset recovery and technical training.
BlockTrace went ahead and enlisted the many Binance deposit addresses.
They went on to say that it seems like the hackers generated a new Binance deposit address after each 1.99 BTC deposit. BlockTrace finished the Tweet thread by saying that “Looks like the hackers scripted Binance address generation and bitcoin deposit amounts of 1.99 BTC.
However, it should be noted that BlockTrace didn’t reveal the entirety of the addresses deposited.
Even Bitfinex’ed joined in the revelations. The long time critic of centralized exchanges claimed that Binance would help them launder these stolen funds.
BlockTrade’s team specializes in blockchain investigations, asset recovery, technical training and offers other services ranging from AML crypto compliance solutions to customized market research intelligence reports.The conduct thorough independent investigations in response to a security related incident. Additionally, they help victims of cyber related crimes such as hacks and scams by locating and recovering stolen assets.
Binance is yet to reply to these serious allegations. We are still to find out if the hackers have just targeted Binance or were there other exchange involved too.