Zaif Crypto Exchange Suffered a $61 Million Theft

It is estimated that the crypto exchange platform lost around 7 billion yen or 61 million dollars.

Zaif is coming up with a strategy to repay all customers who lost their money, and Japan‘s regulators are in search of stronger protection against crypto hackers. Tech Bureau Inc., the owner of Zaif, decided to suspend account registrations until the issue has been resolved. 

The attack happened on August 14, and the exchange is yet to finish a compensation framework. After the incident, the company said that it would repay the affected users by the end of September, but it seems that they need more time.

The Tech Bureau is in the process of striking a deal with another crypto exchange platform in Tokyo. The stake would be sold for 5 billion yen and is supposed to partially cover the damages of Zaif‘s clients. The two parties are still negotiating the terms of the deal.

Although the breach happened on August 14 in a matter of two hours, the exchange did not find out until September 17 when it approached Japan‘s financial regulator (FSA). The news was announced to the public on September 20 and created extreme chaos.

Unfortunately, this is not the first attack in Japan. In January, the Coindesk exchange lost roughly 530 million dollars worth of NEM, and the platform started dispersing refunds a month after the hack. Coindesk was later bought from Monex, a Japanese online brokerage.

In November 2017, Tech Bureau collected 10.9 billion yen for the development of blockchain technology. The funds were acquired through initial coin offerings. Cyber thieves stole money from hot wallets that are always online. Digital assets can also be stored in cold wallets, but that option removes the possibility of withdrawing funds.

Naoyuki Iwashita, a professor at Kyoto University, thinks that the exchange operators should do a checkup of their security system, and massive amounts of money should be handled carefully. Japan Virtual Currency Exchange Association agrees with the professor and is planning to introduce a limit of 10 to 20 percent of funds in hot wallets.

Last year, Japan obligated crypto exchanges to register with the government as a way to prevent money laundering, but the government considers adding even more rules to protect customers. On Wednesday, the Financial Services Agency started a regular meeting to discuss crypto exchanges and initial coin offerings. The FSA is trying to improve transparency and fix urgent problems.