Japanese Bitcoin Exchange Goes Bust After a $700,000 Theft Coverup
As it announced a decision to close down last year Bitcoin firm CoinExchange expressly stated it wasn't caused by a security breach.
Despite taking the lead as the first major country to regulate and license bitcoin exchanges, Japan is home to some of the biggest thefts in the cryptocurrency sector. | Source: Shutterstock.com
- Before Bitcoin firm CoinExchange closed its doors last year in October, an undisclosed theft had occurred a year prior.
- The crypto firm said the closure was purely a business decision.
- CoinExchange expressly ruled out a security breach as causing the closure. Was it an oversight or intentional cover-up?
Two hackers who stole Bitcoin worth approximately $700,000 from a cryptocurrency exchange have been arrested in Japan.
According to Japan Times, the suspects hacked Tokyo-based CoinExchange on October 29th 2018. The two hackers then transferred the funds to two accounts held on cryptocurrency exchanges located within and outside Japan. One of the suspects was an employee of the crypto exchange.
Cover-up or mere oversight?
While the report claims that Tokyo police opened an investigation after the crypto firm reported the theft, there is no record of CoinExchange ever having publicly disclosed the loss. There are several reasons CoinExchange could have chosen not to go public. One of these is that it could likely have induced panic leading users to withdraw their funds en masse. This could have negatively impacted the Bitcoin firm’s business.
But then questions arise as the exchange shuttered a year later over financial distress. In a statement that was released soon after the firm’s board reached decision to shutter in October, CoinExchange expressly ruled out any security breach as having been the reason for the closure. Instead, the Bitcoin firm only stated that it had become economically unviable to operate:
This is purely a business decision and there has not been a security breach or any other type of incident.
Did the loss cause Bitcoin exchange’s closure?
While the loss of cryptocurrency funds worth slightly over $700,000 may not affect a big exchange, CoinExchange was a relatively small and low profile Bitcoin firm. Added to the depressed market conditions that existed then, such a loss could easily have contributed to the firm’s financial distress.
Incidentally, the theft occurred at a time when Japan was beefing up cryptocurrency regulations to reduce such occurrences. Since the hacking of Coincheck where NEM tokens worth over $0.5 billion were stolen, Japan’s financial regulator has taken a more proactive role with a view of reducing thefts. This has been done while still maintaining a progressive stance on Bitcoin.