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DigitalBank Vault News : Delayed Compensation to Victims of the Zaif Hack
ZAIF, an Osaka-based cryptocurrency exchange that was hacked last month has yet to compensate the affected customers. ZAIF cryptocurrency exchange lost over 6.7 billion Yen during the breach, 4.5 billion of which were from customer accounts.
Following the September 14 security breach of the exchange’s hot wallets, Tech Bureau (operators of the platform) announced plans to compensate victims of the hack from funds realized from the sale of a large portion of the platform to Fisco Digital Asset Group.
According to the announcement, the deal with Fisco would fetch the exchange enough funds to compensate its customers that lost cryptocurrencies to the tune of 4.5 billion Yen.
However, on Monday Tech Bureau put out a statement that it is yet to conclude the sales agreement with Fisco.
An excerpt of the announcement:
We have concluded a basic agreement to begin examination aiming for a formal agreement on financial support through a subsidiary of Fisco Digital Asset Group Co., Ltd. After concluding the basic agreement, we are advancing consultation and negotiations for concluding a formal contract, there is no change in the policy to ensure thorough compensation for customer assets.
The crypto industry has seen increased adoption in Japan this year. But with it has seen a rise in crypto related thefts in the country. As previously reported by EWN, the National Police Agency of Japan published a report detailing a steep surge in cryptocurrency theft from $5.91 million in 2017 to over $500 million in the first half of this year.
Government agencies and industry regulators have made various moves to curb this trend in the country. Last year, the Financial Services Agency mandated all cryptocurrency operators to register with the government. This was primarily to curb money laundering, but with the current trend of crypto theft, the agency is considering regulations aimed at ensuring consumer protection.
Both the Zaif and CoinCheck hack involved unauthorized access to the exchanges’ hot wallets. To mitigate this risk factor, the Japan Virtual Currency Exchange Association intends to set a cap on the number of digital currencies that can be held in exchange-operated hot wallets.
Speaking on the security risk inherent in the hot wallet system, Naoyuki Iwashita a respected academic and information security technology expert had this to say:
Exchange operators should overhaul their security, including hot wallets. We are well past the point of handling massive amounts of funds with the mindset of startups.