Japan’s Financial Regulators Warn Zaif Crypto Exchange Regarding Hack For The Third Time

Japan’s Financial Regulators Warns Zaif Crypto Exchange For The Third Time After The Hack

Cryptocurrency firm Tech Bureau Corp. has failed to provide sufficient details on how thieves hacked into its exchange to steal ¥7 billion ($62 million) or explained its delay in reporting the hack, the country’s financial regulator said.

Tech Bureau has said its exchange was hacked over a two-hour period on Sept. 14. It detected server problems on Sept. 17, confirmed the hack the following day, and notified authorities.

In the days following the hack, Tech Bureau, Zaif’s parent company, promised to compensate customers once it is acquired by FISCO, “a professional group that provides superb investment support services,” reportedly seeking a majority stake in Tech Bureau.

The company is now required to determine the facts and the cause behind the theft, as well as formulate and execute measures to prevent another hack. The company is also tasked to determine the attackers behind the hack.

“We have not received enough explanation on what exactly happened. What they told us is an employee’s PC was hacked,” a senior official at the agency told reporters at a briefing. The official, who declined to be identified, warned that further action could be taken against the company if needed.

The company is therefore required to produce a report providing the following information by Thursday of this week:

  1. “Determination of the facts and causes of the leakage (hacking) cases (including clarification of the location of responsibility) and formulation and execution of measures to prevent recurrence”
  2. “Prevention of expansion of customer damage”
  3. “Response to customer damage”
  4. A summary of actions taken regarding, “the content of the (March) 8th business improvement order and the business improvement order issued on June 22.
  5. Concrete and effective improvement plans based on the leakage (hacking) incidents
  6. “Written reports in (1) to (5) above by Thursday, September 27”

FSA staff are continuing to undertake on-site inspections of Tech Bureau. Based on their findings, the agency will reportedly potentially issue more stringent measures such as a business suspension order and/or cancellation of the exchange’s registration.

Distinctly, the country’s crypto-exchanges have been under close regulatory scrutiny after the theft of $530 million in digital coins at Tokyo-based cryptocurrency exchange Coincheck Inc. in January. Coincheck has since been acquired by Japanese online brokerage Monex Group Inc. Japan last year became the first country to regulate cryptocurrency exchanges, as it encourages technological innovation while ensuring consumer protection. Exchanges have to register with the FSA.

While the thefts have definitely elevated anxieties – Japan’s National Police claim crypto theft has tripled in the first half of 2018 – about the security and reputation of Japan’s domestic cryptocurrency exchange industry, it has scarcely dampened the ever-growing appetite for crypto adoption in Japan.

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