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South Korean exchange Coinrail hacked, bitcoin tumbles

By Sheetal Sukhija, The Tokyo News
12 Jun 2018, 09:33 GMT+10

SEOUL, South Korea - In an incident that has renewed concerns about the security of lightly regulated virtual currency exchanges, South Korea’s virtual currency exchange Coinrail announced that it had suffered a massive cyber heist.

Coinrail said in a statement that hackers stole about 30 percent of its virtual currencies, forcing it to temporarily suspend trading in digital currencies.

It added that it has managed to freeze all exposed NPXS, NPER and ATX coins, and that other cryptocurrencies are now being kept in a cold wallet, which isn’t connected to the Internet and is less vulnerable to theft. 

However, refusing to disclose the value of the tokens stolen in the heist, the exchange merely said that it is fully cooperating with the police and other exchanges to try and track down the perpetrators and recover the assets. 

South Korean news outlet Yonhap news estimated that about 40 billion won ($37.28 million) worth of virtual coins were stolen in the heist.

The company’s website is down and shows a ‘System Maintenance’ notification.

The cyber heist sent shock waves through virtual currency markets, wiping billions of dollars off the value of Bitcoin and other digital currencies.

Following the announcement by Coinrail, the price of Bitcoin slumped more than 7 percent.

Since 5 p.m. New York time on Friday, Bitcoin has dropped 11 percent  and was trading at $6,784.04 as of 10:21 a.m. in Hong Kong on Monday, bringing its year-to-date loss to 53 percent. 

In early afternoon trading in Asia on Monday, Bitcoin was trading at around $6,750, which was near its lowest level in about two months and around half the price at which it started the year.

It reportedly dropped about 13 percent.

The price of ethereum also plunged 12 percent and Ripple dropped almost 20 percent lower.

Further, some Asia-listed stocks with exposure to digital currencies also fell. 

South Korea’s Omnitel Inc. and Vidente Co. retreated at least 4 percent.

Japan’s Remixpoint Inc. slumped about 6 percent.

Data provider Coinmarketcap.com revealed that nearly $30 billion in cryptocurrency wealth had been wiped out in about seven hours of trading.

The market value of digital assets, which was at about $830 billion in early January, sunk to a nearly two-month low of $294 billion on Monday. 

The industry has been afflicted by a range of issues including thefts, market manipulation and money laundering in recent months and Coinrail isn't the only virtual currency exchange to fall prey to a cyberheist.

At the start of the year, Japanese exchange Coincheck revealed that hackers stole $530 million worth of virtual currency from its users.

The incident was dubbed as the biggest such theft on record and prompted Japanese authorities to step up scrutiny of exchanges.

Adrian Lai, founding partner at Hong Kong-based investment firm Orichal Partners said that the Coinrail hack has intensified an already negative mood in cryptocurrency markets.

Adding that, “Investors have been increasingly worried about cybersecurity issues. At this stage, obviously, the standard is not high enough."

Over the last year, South Korea has emerged as a hotbed for trading in virtual currencies.

According to Coinmarketcap.com, Coinrail is South Korea’s lesser known trading platforms that trades more than 50 different virtual coins.

It is the world’s 98th most active venue, with a 24-hour volume of about $2.65 million.

Meanwhile, Stephen Innes, head of Asia Pacific trading at Oanda Corp. in Singapore said that enthusiasm for virtual currencies has waned partly due to a string of cyber heists.

Innes added that even though Coinrail is much smaller, the news triggered knee-jerk selling by investors.

He said, “This is ‘If it can happen to A, it can happen to B and it can happen to C,’ then people panic because someone is selling. The markets are so thinly traded, primarily by retail accounts, that these guys can get really scared out of positions. It actually doesn’t take a lot of money to move the market significantly.”

Global policy makers have now warned investors to be cautious in trading the digital currency given the lack of broad regulatory oversight.

Kim Jin-Hwa, a representative at Korea Blockchain Industry Association said in a statement, “Coinrail is not a member of the group that promotes self regulations to enhance security. It is a minor player in the market and I can see how such small exchanges with lower standards on security level can be exposed to more risks.”

The Korea Internet & Security Agency is leading an investigation into the heist along with the local police.

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