The $60 Million Hack: Almost 6,000 Bitcoins Stolen From Japanese Crypto Exchange ‘Zaif’

Siamak Masnavi

On Wednesday (19 September 2018), the Japanese crypto exchange 'Zaif', which is based in Osaka and operated by Tech Bureau Corp, announced that it had been the victim a security breach, and had lost about 6.7 billion yen (roughly, $59.7 million) in crypto (including almost 6000 bitcoins); 4.5 billion yen of this loss from customers' crypto balances and the other 2.2 billion yen from its own assets.

This is how Zaif made the announcement on Twitter:

In case you can't read Japanese, the rough translation is "Important: details of the current situation with virtual currency withdrawals are given in order press release, so please read it." Sadly, at press time, the link to the site that had the press release is down, but, according to the press release, here is what seems to have happened.

The exchange noticed a server error on September 17th. It then suspended all crypto deposits and withdrawals, and put the following notice on its website:

Thank you very much for using the virtual currency exchange "Zaif" on a daily basis. Currently, deposit / withdrawal of multiple virtual currencies and settlement services are suspended. Regarding the circumstances and future prospects of this matter, please read our press release. We sincerely apologize for any inconvenience to our customers. We look forward to your continued support of the virtual currency exchange "Zaif".

The next day, Zaif's security team discovered that the exchange had in fact been hacked, and so reported the facts of the case to Japan's Financial Services Agency (FSA). Zaif reported that the hackers had taken 5,966 Bitcoin (BTC), as well as some Bitcoin Cash (BCH) and some Monacoin (MONA). Monacoin is a cryptocurrency created in Japan; it is "based on the popular ASCII art character, Mona."

Interestingly enough, the FSA had already issued a business improvement order to the exchange's owner, Tech Bureau, back on 8 March 2018, warning them to beef up their security, and saying that Zaif (along with six other Japanese exchanges) must submit a written proposal for enhancement of security measures. We have to remember that the FSA has been taking a tough stance on Japanese crypto exchanges since January 2018, when more than $500 million in crypto (NEM tokens) was stolen from crypto exchange Coincheck.

Tech Bureu says that since, at the present time, its reserve fund only has around 2.2 billion yen (roughly $20 million), in order to ensure that Zaif's customers do not suffer any financial loss, it is going to give a majority stake to a Japan-based firm called Fisco Digital Asset Group for a 5 billion yen (roughly $44.5 million) investment.

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