New raids on Japan cryptocurrency exchanges after Coincheck hack

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Japanese cryptocurrency exchange Coincheck submits to regulators a report over last month's $530 million cryptocurrency theft and proposes security measures that it thinks will protect it against a repeat.
A businessman walks past the building where Japan's Coincheck Inc company is located in Tokyo, on Jan 27, 2018. PHOTO: EPA-EFE

TOKYO (AFP) - Japan said on Friday (Feb 9) it had carried out raids on a number of cryptocurrency exchanges following a massive hack that saw thieves steal US$530 million (S$760 million) in virtual currency.

The hack of Coincheck was one of the largest of its kind, and prompted authorities to search the firm's offices last week, after slapping it with an administrative order.

Finance Minister Taro Aso said on Friday those raids were now being expanded.

"We have started to raid several virtual currency exchanges," he told reporters, adding that the raids were intended to "examine their internal governance structure".

Aso, also the minister in charge of financial services, has admitted that the government "needs to strengthen our supervision" of virtual currency exchanges.

Japanese officials have suggested Coincheck lacked proper security measures, making itself vulnerable to theft.

In the wake of the theft, the country's Financial Services Agency instructed more than a dozen local exchanges to submit reports on their efforts to monitor systemic risks.

Thieves syphoned away 523 million units of the cryptocurrency NEM from Coincheck during the January 26 hack, exceeding the US$480 million in virtually currency stolen in 2014 from another Japanese exchange, MtGox.

That hack prompted Japan to issue new regulations, requiring exchanges to obtain a licence from the FSA, but Coincheck was allowed to continue operating while the agency was reviewing its application.

The firm has said it will reimburse customers who lost money in the hack, which is still being investigated by local authorities.

Reports in Japan's media in recent days have suggested hackers may have accessed the firm from abroad.

The Yomiuri Shimbun earlier this week cited unnamed police sources as saying Coincheck was repeatedly accessed illegally through servers in the United States, Germany and the Netherlands in the days before it was hit.

And the Asahi Shimbun daily reported Friday that part of the stolen cryptocurrency was sent to an exchange in New Zealand called Cryptopia.

Cryptopia offers a platform for trading various virtual currencies including bitcoin, according to its website.

In recent weeks, regulators around the world have discussed or begun imposing new restrictions on virtual currencies.

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