Coincheck Resumes Trading Of NEM Tokens

November 14, 2018 12:26 AM

Nearly 10 months after a reported 523 million NEM tokens (XEM) were stolen from 260,000 users on January 26, 2018, Japanese crypto exchange Coincheck has resumed XEM trading, having worked with “external experts on NEM, Ethereum, and risk handling” to improve its security.

The announcement clarifies that as of November 12, 2018, Coincheck users will be able to purchase XEM or use it as payment, as well as withdraw or deposit Japanese yen. The exchange has also added trading for Ether and Lisk.

The Fallout and the Rebuild

ETHNews has chronicled the series of unfortunate events that took place on and after the January 26 hack. After suspending a range of services in January, including the sale and purchase of XEM, Coincheck explained that the stolen XEM had been taken from a hot wallet instead of a more secure cold wallet. It also was not using a multi-signature system, which would have made the funds more secure.

Officials with Japan’s Financial Services Agency (FSA) visited Coincheck on February 2 in an effort to pin down how hackers had stolen 58 billion yen in XEM, worth a little over $500 million. Before the theft, Coincheck had applied to the FSA for approval to operate but had been asked to fix the security issues listed above. The regulator had allowed Coincheck to continue operating while its registration was being processed.

Earlier that week, Coincheck said it would use company funds to reimburse the users effected by the theft with 88 yen per token stolen; the NEM reimbursement would come before any withdrawal services would be reinstated on the platform. On February 9, Coincheck announced that it would allow its users to begin to withdrawing yen from the platform.

Meanwhile, by March 2, sixteen Japanese cryptocurrency exchanges had received approval from the FSA to form a self-regulatory group, which would eventually become the JVCEA. Its purpose, in part, was to protect virtual currency users in the country.

To go along with the creation of the JVCEA, the NEM.io Foundation announced via press release that Coincheck “has been working to distribute ¥46.6 billion ($440 million) to the 260,000 customers who lost their holdings of XEM.” The release also stated that the NEM.io Foundation would no longer track or monitor XEM movements and that it did not plan to release any further details “due to the sensitive nature of this investigation.”

On April 6 it was reported that Coincheck would be acquired by online brokerage Monex Group for 3.6 billion yen ($34 million at time of press), as the brokerage pursued Coincheck’s customer base. As a result of the purchase, Monex Group’s COO, Toshihiko Katsuya, took over the reins of the exchange.

Since, Monex has reported losses in its crypto assets segment, including 315 million yen for July to September as the exchange remained closed to new customers.

By reintroducing trading for NEM tokens and Ethere, the exchange is sending signals that it has addressed the vulnerabilities pointed out by the FSA.

The FSA, meanwhile, has continued to work to strengthen security around cryptocurrencies. On May 7, ETHNews detailed the new five-point regulatory standards it planned to implement to help prevent cryptocurrency theft. In October, the FSA approved the JVCEA’s application for self-regulatory status, meaning it will police the country’s exchanges. Members include SBI Virtual Currencies Corporation, BitFlyer, and QUOINE. Coincheck is not a member.

Nicholas Ruggieri studied English with an emphasis in creative writing at the University of Nevada, Reno. When he’s not quoting Vines at anyone who’s willing to listen, you’ll find him listening to too many podcasts, reading too many books, and crocheting too many sweaters for his dogs, RT and Peterman.

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