Bitpoint exchange hacked for $32 million despite preparations

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On July 12, Bloomberg reported that Bitpoint, one of Japan’s largest cryptocurrency exchanges, was hacked. This resulted in the theft of ¥3.5 billion ($32 million), with ¥2.5 billion ($23 million) belonging to customers.

The hack was focused on five currencies which included SegWitCoin (BTC) and Ripple (XRP). This hack occurred on July 11. All funds taken, according to the company, were stolen from hot wallets and none came from cold wallets.

The company announced that they had immediately suspended all deposits and withdrawals as soon the hack was discovered. Customers were informed immediately via email of the hack, and that services would cease immediately until the matter was investigated more thoroughly.

This is a gigantic blow to Bitpoint. Japan has been at the forefront of recognizing the potential value and inevitability of cryptocurrencies in the future, and Bitpoint looked to be moving ahead of the pack in terms of innovation and opportunities provided to customers. They had begun to establish themselves as the leading exchange service in Japan, becoming the third largest exchange service in the country.

However, this news definitely knocks them down a notch or two. Not only have their systems been proven to be vulnerable, but in January 2018 Japan‘s Financial Services Agency had ordered several exchange services, including Bitpoint, to improve their internal controls. This came after Coincheck lost over $534 million in an attack.

According to reports, Russian hackers were reportedly behind the attack on Coincheck. This theft is the largest of a cryptocurrency exchange in recorded history and is a major reason why regulators pushed to improve the overall internal controls of systems at these exchanges. Bitpoint assured regulators that they had taken the proper precautions, but it appears that their systems were still vulnerable.

This attack is the third against a major cryptocurrency exchange service in Japan in the last 20 months. Not only was Coincheck hacked near the end of 2017, but so was Zaif in September 2018. The total amount lost to Zaif was $60 million. Both of these exchange services were forced by Japan’s financial regulators to pay back the amount lost to customers, and it is expected that the same policy will be imposed upon Bitpoint.

What has to be frustrating for regulators is that two of these attacks occurred directly after the agency informed these exchanges that they needed to improve security and operations. One has to wonder if these warnings were being heeded as intensely as they should have been.