Business 8 October 2018

Erik Gibbs

Zaif exchange no longer accepting new customers

The parent company of Japanese cryptocurrency exchange Zaif, Tech Bureau, has announced that it is temporarily halting new accounts on the exchange. The decision follows the hack of the exchange in September, which saw it lose around $60 million worth of cryptocurrency. While stressed as only temporary, the new account suspension is certainly one that will set off a few alarms. The suspension only impacts any potential new customers—not those who already have accounts or who have already verified their identification.

Tech Bureau brass said that the company will pull the suspension once it decides on a compensation plan for its customers who lost holding during the hack. The reason is a little puzzling given that the company had allegedly already secured the funding necessary to repay its customers. That funding was announced at the same time the company announced the theft.

In an announcement by the firm, Tech Bureau said, “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, and we are continuing to consider the details of specific response…As soon as the content is confirmed, we will report it promptly.”

The exchange is being investigated by the Japanese Financial Services Agency (FSA), which has already issued it a business improvement order. Nonetheless, the FSA wants to take a closer look at the company’s user protection systems. Zaif has received three business improvement orders since it opened—two in this year alone.

Some of the stolen crypto has already been tracked, but getting it back is going to be virtually impossible. The funds were sent to offshore exchanges, the majority of which maintain wallets that do not have to adhere to any anti-money laundering or Know Your Customer regulations. This will make it difficult to determine who owns the wallets.

Two weeks after the hack occurred, Zaif finally realized what had happened. It immediately halted operations and announced the theft. It also said at the time that it had worked out a deal with Japan-based Fisco Digital Asset Group Co. ltd. that would see the latter receive a major share in the company in exchange for about $44.5 million, which Zaif said would be used to reimburse its customers, along with funds it held in reserve.

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

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