20 Sep Japanese crypto exchange Zaif loses nearly $60M to hackers
At the same time the New York State Attorney General issued a 42-page report with concerns about cryptocurrency exchange security and investor protection, Japanese cryptocurrency exchange Zaif was hacked for $59.7 million earlier this week.
The loss was discovered by Tech Bureau, operator of the Osaka-based exchange on Monday. Ironically, Zaif was one of seven cryptocurrency exchanges under examination for weak security practices by Japan’s Financial Services Agency which has been working hard to establish new, higher security standards after Coincheck’s loss of $500 million to hackers earlier this year.
Zaif public statement & apology
In an online statement, Zaif said a July 14 hack attempt had been investigated and since September 14, some customers reported problems with deposits and withdrawals. On further investigation, the company determined company hot wallets were hacked and assets stolen by unknown criminals on September 17.
An estimated 5,966 bitcoin (BTC) and an unknown amount of MonaCoin (MONA) and Bitcoin Cash (BCH) worth approximately $40.4 million of investor cryptocurrency was stolen. An additional $19.6 million of Zaif company funds were also taken.
Exchange for sale
Tech Bureau issued a full apology saying, “We humbly apologize for betraying the trust of all our customers who have entrusted us with their precious assets.”
The exchange owner said it hopes to sell a majority stake in the cryptocurrency exchange for $44.5 million to Japanese investor group Fisco Co Ltd, to be used to compensate customer losses.
Zaif is cooperating with Japanese regulators and law enforcement officials in the investigation. It hopes deposits and withdrawals will be available by the end of September once security reviews are completed and new security measures in place.
According to Coinmarketcap, Zaif is listed as the 35th largest cryptocurrency exchange and traded $62.4 million in its most recent day of trading before it was suspended.
It’s just another in a long series of cryptocurrency exchange problems suffered by retail investors in most major markets. Inadequate security is a major reason why institutional investors are still wary of cryptocurrency investments and it’s also more evidence of the need for stronger regulatory oversight and investor protection.