On Friday the 26th of January, hackers stole around $534 million US ($657 million CAD) from Tokyo digital currency exchange Coincheck Inc. The hackers are attempting to sell their stolen XEM coins, coins from the native digital currency of NEM.

Jeff McDonald, the creator of the NEM Foundation and the XEM digital currency, traced the stolen coins to an anonymous account. The account attempted to sell the coins immediately by moving the coins to six different digital currency exchange sites.

“[The hackers are] trying to spend them on multiple exchanges,” said McDonald. “We’re contacting those exchanges.” The location of the hackers’ account is, however, unknown.

Coincheck digital currency heist is regarded as one of the world’s biggest ever digital currency thefts. As of 3:57 p.m E.T, XEM was trading at 80.6 cents US (99.2 cents CAD) per coin with a total market value of around $7.26 billion US.

Japanese authorities have ordered Coincheck to raise its security standards. According to Reuters, Japanese authorities are also investigating every digital currency exchange in Japan for security purposes.

Coincheck digital currency heist

Although it remains unclear how Coincheck was hacked, around 523 million XEM coins were sent from a NEM address at Coincheck at 3am local time. The breach was not discovered until 11:25 am, almost eight and a half hours later.

“We are tracking the funds that were taken and the NEM Foundation is tagging every account that has the funds in them.” said McDonald in an interview with Inside NEM. “We are currently reaching out to exchanges and halt any deposits that were made with these XEM. As bad as this situation is, NEM has a very powerful API and adding 1 API to any deposit will show exchanges if stolen funds were added to any deposit.”

The 523 million stolen XEM coins made up 5 percent of the total 9 billion XEM coin supply.

In a website announcement, Coincheck stated that they would repay about 90 percent of the stolen funds to its 260,000 users. It is, however, unclear when they can pay or how this is possible.

Crypto hopping

NEM Foundation spokeswoman Alexandra Tinsman stated that hackers started sending out XEM coins to random accounts in 100 XEM batches worth about $83 USD (approximately $102 CAD) each.

“When people look to launder these types of funds, they sometimes spread it into smaller transactions because it’s less likely to trigger [exchanges’] anti-money laundering [mechanisms],” said Tom Robinson, co-founder of Elliptic, a digital currency security firm in London.

Crypto hopping is becoming a more common technique used by cybercriminals. To ensure that the stolen coins are almost impossible to trace, hackers often transfer the digital coins onto an exchange site and swap the XEM coins into another digital currency. They then convert the digital currency to conventional currency.

Regulators warn about possible cyber attacks

On the 29th of January, Japan’s Financial Services Agency (FSA) ordered improvements to Coincheck’s operations. They issued Coincheck with a “business improvement order” and ordered Coincheck to provide a full report by February 13th.

Although in 2014, Japan implemented regulations after the collapse of bitcoin exchange Mt.Gox, Japan’s FSA said it will continue to raise awareness following the Coincheck digital currency theft.

The FSA began by warning other digital currency exchanges about their susceptibility to large-scale cyber attacks. The agency told exchange operators to check their information and operations systems and report incidents that compromise security immediately.

Following the Coincheck digital currency heist, Japan’s top financial diplomat believes the regulation of digital currencies will be discussed at the G20 finance chiefs’ meeting in Argentina in March.

 

Image credit: Coincheck

 

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