Another security breach hits a major Japanese cryptocurrency exchange and the company was forced to seek an outside investment to reimburse customers for their losses.
A hack of Osaka, Japan’sZaif cryptocurrency exchange this Monday, September 17, resulted in a theft of $60 million in users funds according to the company which is diligently working to reimburse customers robbed in the cybersecurity breach.
Zaif, the 101st largest cryptocurrency exchange in the world by volume according to CoinMarketCap, worked to contain the problem as soon as a detected server error was identified as a more malicious hacking attack.
Deposits and withdrawals to the exchange were put on temporary stoppage while Zaif employees make sure their system is secure before restarting basic account services.
The hack allegedly exploited a weakness in Zaif’s system involving their “hot wallet” or the account in which the company stores funds for transactions such as crypto to crypto purchases or even conversion of cryptocurrency into hard currency. This “hot wallet” contained a large amount of funds that were siphoned off by the hackers who mainly targeted bitcoin, the highest valued cryptocurrency currently on the market.
In a brazen move the attackers took some 6.7 billion Japanese yen or approximately $59.67 million in bitcoin, bitcoin cash, and monacoin according to ZDNet. The stolen money represents a mixture of company funds and customer account money which represented an estimated 66% of the stolen money from the hot wallet account. The amount was so much, however, that the company is being forced to explore strategic options in order to shore up its position in the cryptocurrency trading market.
This isn’t the first time a cryptocurrency exchange is the victim of hacking and it probably won’t be the last. Even Zaif itself suffered a system glitch this past February when users were able to purchase cryptocurrency for 0 yen. The incident does, however, draw worrying attention to a nascent industry that is still trying to gain mainstream currency.
Though Zaif is securing funds to reimburse affected customers according to its press, this may be more as preemptive maneuver before they are directed to do so by the Japanese government as Coincheck was forced to do after a $530 million hack in 2017.
Press from Tech Bureau Inc, the company that manages the exchange, says that Zaif will help cover the shortfall with an investment from Fisco Digital Asset Group which will, in turn, become a majority shareholder in the Osaka firm after the transaction is completed.
Fisco management would also be brought onboard in the auditing department as well as to Zaif’s board of directors with this investment. The total investment from Fisco is some $44 million per CoinDesk which also reiterated that the theft of the cryptocurrency is being treated as an active criminal investigation.
Naturally, the company is also implementing and investigating more robust security measures in the wake of the hack to make sure account holders don’t suffer a similar occurrence in the future.