Jan 28, 2018 by Andrei Calina

A cryptocurrency exchange based in Japan is expected to refund more than $400 million to customers, as the entire amount of money was stolen by hackers two days ago, in what is considered to be one of the biggest digital funds heists.

According to The Guardian, Coincheck announced that they will use own funds in order to reimburse around 46.3bn yen to the 260,000 customers who lost their NEM holdings, currently the world’s 10th virtual coin, in terms of market cap.

The unfortunate event happened this Friday when the exchange detected an “unauthorized access”, followed by an eventual trading suspending for all cryptocurrencies, except Bitcoin.

A technical mistake?

Coincheck declared that all the stolen NEM coins were stored in a “hot wallet”, which is less secure than a “cold wallet” outside the Internet. This happened due to specific technical difficulties, as well as a shortage of staff capable of dealing with the coins.

This cryptocurrency theft is currently the biggest in history, surpassing the 58bn yen ($530m) loss which occurred in 2014 when they disappeared from MtGox. This left to a collapse of the Toyko-based exchange shortly after this, as they admitted that 850,000 coins, which at that time had a worth of $480 million, disappeared from its vault.

Surprisingly, this didn’t reduce that enthusiasm for cryptocurrency in Japan, as the country became the first country in the world to proclaim virtual coins as legal tender, back in April 2017.

In this very moment, more than a third of the worldwide cryptocurrency transactions are denominated in yen, while more than 10,000 businesses in the country are accepting Bitcoin. Also, a significant amount of young Japanese investors and not only had been convinced that cryptocurrency is a way of gaining strong profits in a relatively short time.

Can this be the end of another big exchange?

Back to the NEM loss, a lot of newspapers in Japan called the way Coincheck is managing coins as “sloppy”, adding that the company has actually “expanded business by putting safety second”.

The local Financial Services Agency is now expected to take action against the exchange, despite being considered the leading Bitcoin cryptocurrency exchange in Asia.