Update 1:51 am JST – Statement of NEM included.

Coincheck faced the Japanese media tonight in a press conference in Japan. The media briefing revealed a lot as to how the company manages the coins that users keep on its platform.

Start of the Hacking Incident:

The hacking incident happened around 3 am (Japan Time). Coincheck did not notice the incident until around 11:25 am. After verifying the incident, the company paused NEM deposits at 12:07 pm and also paused NEM trading at 12:38 pm.

By 4 pm, Coincheck has paused all currency withdrawals. Soon after (5:23 pm), the company paused all but BTC trading. Furthermore, deposits from credit cards, convenience stores, etc were also halted.

Security of Coincheck

Coincheck touted in its website that it keeps its coins in cold wallets. However, this is only true for bitcoin. Altcoins, NEM included, are in hot wallets. (For a refresher, please click here).

Coincheck also did not adapt multi-signature in its accounts. When pressed further, they said they couldn’t build with the current number of people in their engineering team.

What about the lost XEMs?

Approximately 500 million NEM coins are lost due to the hacking incident. This is worth around $530 million, making it the biggest hacking incident in cryptocurrency, bigger than Mt. Gox.

Initially, Coincheck requested the NEM Foundation if it could do a hard fork. However, NEM declined to do this. Details of what else are discussed between Coincheck and NEM are not yet public. However, it was revealed that Coincheck already traced the movement of the lost coins and would try to get it back.

Update: 1:51 am JST, NEM released a statement that is working with Coincheck to track the movement of the stolen NEM tokens.

NEM + Coincheck are working together to track + flag the hacked wallets + related accounts with the objective of tracing the ultimate owners of the suspected wallets. NEM is identifying + flagging suspected wallets holding the stolen funds + sending info to exchanges. More soon. — Inside NEM (@Inside_NEM) January 26, 2018

The company also was not sure why it was targeted. However, given the lack of multi-signature, the presence of hot wallets, anyone can pretty much guess why Coincheck is targeted.

On the handling of the issue

Coincheck took a considerable amount of time to notice the lost amount and it did not have a precise answer as to why. The company is also criticized for failing to clarify the issue. While users were left wondering what has happened, the value of NEM has dropped along with the value of other coins. As they are trying to recover the lost amount, the media ask Coincheck if their insurance fund worth 6 million JPY can be applied to users who were affected by the hack. However, it seems the insurance fund is only for victims of phishing fraud.

Other Details:

Only NEM was hacked. They did not confirm the state of other cryptocurrencies but also said that they are still investigating.

When asked how they can continue doing business even without the license, Coincheck argued that they were allowed to run by Japan’s Financial Services Agency because the law regarding virtual exchanges is not yet in effect.

There is no time frame as to when Coincheck will open their trading again for altcoins.

This is a developing story. You can check out our live tweet of the press conference below:

Q: How many customer support staff do you employ?

A: 50 staff. We have plans to increase it to 200 in the near future.#Coincheck — BitPinas (@bitpinas) January 26, 2018

Q: You announced before that you launch an insurance service worth JPY 6M. How does it work?

A: That insurance service is for investor's involved in a phishing fraud, so it's not for this kind of incident#Coincheck #Pressconference #cryptocurrency #NEM #コインチェック — BitPinas (@bitpinas) January 26, 2018

Q: Do you have a pipeline on WHEN you will disclose?

A: Not decided yet but we are fixing the schedule on when we can disclose them#Coincheck #Pressconference #cryptocurrency #NEM #コインチェック — BitPinas (@bitpinas) January 26, 2018

Q: What support did the NEM Foundation has given to you?

A: We couldn't disclose yet but we have discussed with them#Coincheck #Pressconference #cryptocurrency #NEM #コインチェック — BitPinas (@bitpinas) January 26, 2018

Q: How did you decide into offering NEM trading in your exchange?

A: We judged using a number of pointers, like other exchanges' liquidity.#Coincheck #Pressconference #cryptocurrency #NEM #コインチェック — BitPinas (@bitpinas) January 26, 2018

Q: Do you intend to disclose the number of people affected or the amount hacked?

A: We need to confirm first with our investors (like ANRI, Will, incubatefund)#Coincheck #Pressconference https://t.co/erzCyNBeLB #cryptocurrency #NEM #コインチェック — BitPinas (@bitpinas) January 26, 2018

Q: Did you know about the Korean Exchange site that got hacked recently?

A: Yes of course, so we did our best to make the security stronger#Coincheck #Pressconference https://t.co/erzCyNBeLB #cryptocurrency #NEM #コインチェック — BitPinas (@bitpinas) January 26, 2018

Q: Normally it takes 2 months to get a license, why can't you have it even after 5 months?

A: We set applying for a license as our first priority#Coincheck #Presscon https://t.co/erzCyNBeLB #Cryptocurrency #NEM — BitPinas (@bitpinas) January 26, 2018

Q: Why is it not possible to withdraw even in JPY

A: We need to protect our investors, so we haven't decided yet on when will it be possible again. #Coincheck #Presscon https://t.co/erzCyNBeLB #Cryptocurrency — BitPinas (@bitpinas) January 26, 2018

Q: How can you keep running without a license?

A: The FSA has set a rule that we can finish the license application until the law is enforced. So it's fine to keep running even without license under the current Japanese rules. So we followed the rules.#Coincheck #Presscon — BitPinas (@bitpinas) January 26, 2018

Q: Do you have any deadline on when you are going to adapt multi-sig?

A: Undecided yet#Coincheck #Presscon https://t.co/erzCyNBeLB #Cryptocurrency — BitPinas (@bitpinas) January 26, 2018

Q: Why were you aimed by the hacker? And what did you do after noticing?

A: We reported to the police today. We do not know why we are aimed. #Coincheck https://t.co/erzCyNBeLB #Cryptocurrency — BitPinas (@bitpinas) January 26, 2018

Q: How is your license registration coming along?

A: We could not answer about the status. the FSA (Financial Services Agency) decides that. #Coincheck — BitPinas (@bitpinas) January 26, 2018

Q: Can you guarantee (insure) the investors who lost their #XEM (NEM)?

A: We are discussing how we can get guarantee for investors. #Coincheck — BitPinas (@bitpinas) January 26, 2018

Q: Why did it take you time before you noticed the incident? (8 HOURS)

A: We couldn't say the reason, we just noticed the reduction in amount by 11:25 — BitPinas (@bitpinas) January 26, 2018

Q: When can you restart trading, withdrawals, deposit?

A: We cannot say at this time #Coincheck — BitPinas (@bitpinas) January 26, 2018

Q: WHY DIDN'T YOU BUILD A SECURITY SYSTEM?

A: We couldn't build enough engineering team at this time #Coincheck — BitPinas (@bitpinas) January 26, 2018

Q: Can you RECOVER #NEM back to your account?

A: It's Impossible but we are able to trace the movement of the amount and will try to get it back #Coincheck — BitPinas (@bitpinas) January 26, 2018

Q: DOES this affect your BTC Service? (Like retail store payments)

A: We are investigating. — BitPinas (@bitpinas) January 26, 2018

Q: How much volume is affected? How many investors are affected?

A: We are still investigating both the number of investors and the amount affected by this. #Coincheck — BitPinas (@bitpinas) January 26, 2018

Q: Can Investors get back their assets?

A: We are working hard to have it recovered. — BitPinas (@bitpinas) January 26, 2018

Q: Why didn' they keep their asset in hot wallet?

A: They reflect to keep the asset in hot wallet. (note, I will clarify this later #sorry) — BitPinas (@bitpinas) January 26, 2018

Coincheck says they keep their assets in hot wallet not COLD Wallet #Coincheck — BitPinas (@bitpinas) January 26, 2018

Q: Can investors get back their asset ?

A: They are working hard to recover first.#coincheck — BitPinas (@bitpinas) January 26, 2018

#Coincheck asked #NEM to do a hardfork because of the "incident" but their answer is NO. — BitPinas (@bitpinas) January 26, 2018

This is the timeline of what happened. We will also give you a translated version of this as soon as the conference is over. #Coincheck https://t.co/VaJXTnpnXp — BitPinas (@bitpinas) January 26, 2018

#Coincheck CEO started the conference by saying sorry about what happened — BitPinas (@bitpinas) January 26, 2018

Currently there are close to 100 people during this press conference in #CoinCheck https://t.co/HRd6diRi8V — BitPinas (@bitpinas) January 26, 2018

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