Coincheck Hot Wallet Cryptocurrency Hack Largest On Record: $530M In NEM Stolen

A cryptocurrency exchange in Asia called Coincheck has announced that it was the victim of a massive hack that saw hundreds of millions of dollars worth of cryptocurrency stolen in what is the largest heist of its kind in history. Coincheck doesn't call the heist a hack, it says that the coins were sent illicitly outside of the service.

nem xem coin logo

The cryptocurrency stolen is called NEM, which is the tenth largest cryptocurrency in market value. In total there were 500 million NEM tokens taken in the heist worth about $400 million, according to Bloomberg. However, Cointelegrpah reports a much higher number, claiming that 523 million NEM coins were taken with a market value of approximately $534 million.

Since the heist, Coincheck has stopped trading in all tokens except Bitcoin, as the company says that it doesn't know how the NEM tokens were taken (sounds like a hack to us). Coincheck co-founder Yusuke Otsuka said, "We know where the funds were sent. We are tracing them and if we’re able to continue tracking, it may be possible to recover them. But it is something we are investigating at the moment."

Japan's Financial Services Agency is also investigating the theft and issued a statement noting it was "looking into the facts surrounding Coincheck." Coincheck had applied to the agency to be licensed as an exchange and has been operating under the agency's rules putting the company under the supervision of the agency according to an official. Japan required cryptocurrency exchanges to be licensed after the collapse of Mt. Gox in 2014.

Coincheck Site

The theft of the massive number of NEM tokens has affected the cryptocurrency market and NEM's value tumbled 11% over a 24-hour period to 87 cents per token. Bitcoin also declined 3.4% with cryptocurrency Ripple declining 9.9%. Cryptocurrency is a volatile market with values constantly fluctuating. Earlier this month, the value of Bitcoin dropped to around $10,000 from a high of $17,000.

NEM Coin Value Plummets
NEM Cryptocurrency value plummets on the news of the heist

"Caveat emptor," said Yvonne Zhang, who had spoken on a panel on the future of cryptocurrencies at an Association of Futures Markets conference in Bangkok on Friday. "The 'investors' that did not do due diligence and take time to understand what they’re trading in, both venue and subject matter, face unhedgable risks. If they continue to 'trade' the same way knowing the murky nature of this market, they’re gambling."

Cointelegraph reports that Coincheck was storing the NLM tokens in a simple "hot wallet" rather than a more secure multisig wallet. Coincheck has insisted that its "security standards were not low," despite the fact that reports indicate that other cryptocurrencies traded on the site are stored in multisig wallets. The company has expressed a desire to refund all the money, but it seems unlikely, with the stolen funds worth hundreds of millions of dollars, that a refund will be possible. The company admits that the worst-case scenario is that customers may never get their money back. Last month another large cryptocurrency heist was pulled off. In that heist, $62 million in Bitcoin was stolen from a cryptocurrency mining service called NiceHash.