Japanese cryptocurrency exchange Coincheck lost $534.8 million (58 billion yen) worth of NEM coins to hackers last Friday. To that effect, DataTrek Research has said the attack shows cryptocurrencies are still prone to hacks.
The company said the coins, which was on a “hot” (online) wallet, were diverting to another account. They said they would be refunding 260,000 affected users a total of $425 million.
Those affecting would be repaid in JPY through Coincheck Wallets. The company will use XEM/JPY (NEM/JPY) rates on the cryptocurrency exchange Zaif (operated by Tech bureau Corp).
“The weighted average price derives using prices during the period beginning with the suspension of new purchases and sales of NEM on the Coincheck platform and ending with the release of this notice.”
DataTrek Research co-founder Nicholas Colas says the storage employs by Coincheck was “not industry standard.” It is already known that hot wallets are more prone to attacks than cold (offline) wallets. It is unclear if the company wanted to facilitate transactions with all the amount put online.
“Keeping 100 percent of your crypto assets online is a bad idea for an institution, or frankly, for an individual who has a large amount invested in it as well”.
He says most of the attacks are perpetrates by a group of people because once they are lost, the attackers have to find where to divert funds. This is a challenge for one person.
In the meantime, Japanese regulators said on Monday they planned to enforce “administrative punishment” against Coincheck for the hack. Tokyo Metropolitan Police was also planning to question those associated with the exchange. This was reported on Monday by a local news agency Kyodo.