Japan’s FSA Begins Probe Into $60 Million Hack Of Zaif Crypto Exchange

Japan's Financial Services Agency (JFSA) is probing the $60 million crypto heist at the exchange platform Zaif.

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Japan’s Financial Services Agency (FSA) is probing the $59 million crypto heist at the exchange platform Zaif.

Investigators probing leads in Zaif hack

An alleged security breach at the exchange saw hackers make off with millions worth of crypto tokens belonging to investors and the exchange.

According to local media outlets, the financial regulator has dispatched a group of investigators from its staff to Zaif’s parent company Tech Bureau.

The enforcement agency has asked the investigators to, among other things, find out whether the Osaka-based company would be able to compensate affected customers.

Following the latest hacking incident, the Japan Virtual Currency Exchange Association (JVCEA) is said to have asked all cryptocurrency exchanges within the country carry out immediate audits to ascertain that their security protocols are not compromised.

It appears that exchanges heeded the advice and executed inspections within hours of the release of the request notice, with popular exchanges having already returned an all-clear report.

Crypto exchanges BitFlyer and Quoine were the first to clarify that they had conducted a thorough inspection and their security experts had not found or detected any breaches at the moment.

Japan is one of the countries that has seen an increased adoption and use of cryptocurrency, but it appears this has also attracted cybercriminals, targeting both exchanges and individuals.

A few days ago, Japan’s National Police Agency released an official report that showed cases of crypto theft has more than tripled in 2018 compared to 2017.

The agency stated that the theft of cryptocurrencies from users and exchanges had spiked in the first six months of the year. In that period, the police recorded about 158 cases in which hackers stole crypto assets worth 60.503 billion yen ($540 million) in Japan.

The staggering amount also includes money stolen during the biggest hack in the crypto industry in 2018 – the Coincheck attack in January this year saw attackers steal NEM tokens estimated at the time to be worth 58 billion yen ($520 million).

Since then, the FSA and other regulatory bodies have tightened oversight and scrutiny of the market. However, that doesn’t seem to have bothered cyberattackers who continue to target and exploit vulnerabilities in the exchanges and individual user accounts.

Growing concern among regulators about Zaif

The attack on Zaif has been a bit perplexing. As widely reported, the security breach happened on September 14, but the platform claims it was only able to detect the attack on its server three days later on September 17.

During the attack, hackers managed to steal digital currencies valued at 6.7 billion yen (or nearly $60 million). Of these amounts, the criminals stole 4.5 billion yen worth of crypto from the platform’s customers and another 2.2 billion yen worth of crypto from Zaif’s assets.

It is not clear if the current investigation takes into consideration previous citations the exchange had received from the financial regulator.

Earlier in the year (in March and June), the FSA sent two official warnings to the crypto exchange.  The first warning detailed that the regulator had found instances of possible “system failure.” It also mentioned that the exchange engaged fraudulent withdrawals.

These appeared to be serious cases of security concerns, however, even though Zaif failed those particular audits, regulators ultimately did not order the exchange to close down its operations.

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