Top 5 Biggest Crypto Exchange Heists in History

Losing around $60 million in cryptocurrencies including Bitcoin, Bitcoin Cash, and MonaCoin, Zaif was the second major Japanese exchange to lose …
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Christina Comben| May 09, 2019 | 21:00


The news of the Binance hack left the cryptocurrency industry rattled. Although, it turns out that a massive $40 million’s worth of BTC doesn’t even register this heist among the worst. Check out the five biggest exchange hacks in crypto history.


The 5 Biggest Exchange Hacks in Crypto

5 biggest crypto exchange hacks

As you can see from the above image, the Binance hack comes in a measly sixth place. There’s no doubt that the world’s biggest cryptocurrency exchange will recover from its stinging loss.

The hacker only targeted Binance’s hot wallet which holds just 2 percent of all the exchange’s BTC. In fact, CEO Changpeng Zhao (CZ) is already chalking it up to a “lesson learned” (albeit an expensive one).

cons: 4 While it is a very expensive lesson for us, it is nevertheless a lesson. it was our responsibility to safe guard user funds.

We should own up it. We will learn and improve.

As always, thank you for your support!

— CZ Binance (@cz_binance) May 8, 2019

And, it could have been way worse–just ask Coincheck, the Japanese exchange that still takes first place in the biggest exchange hacks in crypto history.

1. Coincheck (Jan 2018)

According to cryptocurrency intelligence agency CipherTrace, 2018 eclipsed all other years as far as exchange hacks go, with Coincheck leading the way. To kickstart the year that would also be the longest bear market for the industry, Coincheck was hit by hackers stealing more than 500 million NEM cryptocurrency (around $530 million).

NEM stuck the blame firmly on the ‘relaxed security measures’ of Coincheck even though it was only its cryptocurrency XEM that was stolen. No hard fork was carried out and Coincheck, for now at least, retains the top place on the list.

2. Mt. Gox (Feb 2014)

Eclipsed in the dollar amount stolen, the Mt. Gox hack is still undoubtedly the most infamous exchange hack of all time. It’s still the largest Bitcoin heist, in fact, with an eye-watering 850,000 BTC snatched by hackers (around 6 percent of all available BTC at the time).

Up until the start of 2014, Mt. Gox handled some 70 percent of all the world’s BTC transactions. By February of that same year, it was declaring bankruptcy.

While some 200,000 of the stolen BTC was recovered, other users remain hopeful of recuperating their funds. A trustee Nobuaki Kobayashi is now in possession of over 141,000 BTC and 142,000 BCH and is supposed to return them to their rightful owners. The question is, when?

3. BitGrail (Feb 2018)

Shady as they come Italian exchange BitGrail lost some 17 million Nano tokens worth around $170 million in the third biggest exchange hack in crypto history.

While the hack was revealed in 2018, the plot around the story soon began to thicken as users became aware that the exchange had been targeted previously and was insolvent for a number of months prior.

Moreover, its owner Francesco Firano tried to place the blame on Nano, requesting a hard fork to recuperate the funds. This was denied and the blame was laid squarely on BitGrail. In 2019, a court ordered Firano to return the missing funds to BitGrail customers.

4. Bitfinex (Aug 2016)

Controversy over Tether and one of the largest ever exchange hacks in crypto history, it’s a miracle that Bitfinex is still standing. The hack happened in August 2016 when more than 120,000 bitcoins were stolen causing the value of BTC to plummet within hours of the attack.

Users were compensated, however, unlike in many other situations, but they were paid out in BFX tokens rather than BTC.

5. Zaif (Sept 2018)

Losing around $60 million in cryptocurrencies including Bitcoin, Bitcoin Cash, and MonaCoin, Zaif was the second major Japanese exchange to lose funds after Coincheck earlier in 2018. This lead to Japan’s FSA to carry out an investigation of the incident.

They later found out the much of the stolen funds were traded on exchanges including Binance and Huobi. Hackers did this by creating hundreds of accounts and depositing just 2 BTC in them all, thus not triggering Binance’s AML red flags.

Don’t Keep Your Funds on an Exchange

We’re watching history repeat itself time and again. Hackers already stole over $356 million from exchanges in Q1, 2019.

The Binance attack is just another in a never-ending security breach waiting to happen and the moral of the story is always the same. Don’t keep your funds on an exchange. If you do, you’re putting your cryptocurrency at risk.

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Bitcoin Value at Six-Month High Despite $40 Million Hack

… exchange Coincheck saw $500 million stolen by hackers, and in 2016, $72 million were stolen from the Hong Kong-based exchange Bitfinex.

By Rebecca Heilweil

On Tuesday, the Taiwan-based cryptocurrency exchange Binanceー one of the largest in the world ーannounced that about $40 million worth of bitcoin (approximately 7,000 BTC) had been stolen by hackers. Bitcoin’s value is at a six-month high, but the security breach raises the specter of cryptocurrencies’ potential cyber vulnerabilities.

“The important point here is that these were hacks of exchanges, but not of bitcoin itself,” Murad Mahmudov, a cryptoanalyst and the founder of Adaptive Capital, told Cheddar. He believes that investors should not be especially concerned, and said that “small pains like this are expected of a relatively immature industry, such as the cryptocurrency space.”

To those who are worried, Mahmudov recommends keeping currency that investors are not actively trading in their personal hardware wallets, instead of leaving them in exchanges.

Investors are increasingly interested in cryptocurrencies, especially amid anticipation that Facebook may soon reveal its own. However, ensuring the security of exchanges remains a key concern, since bitcoin ー and and other cryptocurrencies ー are premised on decentralization and immutability.

Historically, close to $2 billion dollars worth of cryptocurrency has now been been lost to hacking, according to the Wall Street Journal. Last year, the Japan-based exchange Coincheck saw $500 million stolen by hackers, and in 2016, $72 million were stolen from the Hong Kong-based exchange Bitfinex.

The Binance hackers used a combination of phishing, viruses, and other attacks, and were able to access account information, including two-factor authorization codes, a widely-used security measure. Binance suspended withdrawals and deposits into the system to investigate the problem, which they hope will ward off hackers in the short-term. The hack also raised the possibility of a “re-org,” in which Binance would adjust (or “undo”) the transaction history by distributing the hackers’ coins among the crypto-miners. The plan spurred extensive debate on social media, and the exchange’s CEO ultimately eschewed the idea.

The company says it will be paying affected users back through an emergency insurance fund.

Mahmudov, an investor in Bitcoin himself, remains confident. “The fact that the price didn’t react at all ー and only went further went up-and-up ー makes me think that we are in the beginning of a new bullish cycle,” said Mahmudov. Today, bitcoin hit a value of $6,000 for the first time since November, and Mahmudov anticipates the number could get as high as $8,500 by the end of this year.

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Is Any Crypto Exchange Truly Secure?

In light of yesterday’s Binance hack, exchange security is back in the … Gemini proudly promotes the fact that user funds held in their hot wallets are …

In light of yesterday’s Binance hack, exchange security is back in the spotlight. Changpeng Zhao has reassured affected users they would be compensated for the loss of 7,000 bitcoins, and Binance has a reputation for excellence when it comes to security.

But as the latest hack has shown, even the best security may not be secure enough.


Not Your Keys, Not Your Bitcoin

The phrase “Not your keys, not your bitcoin” is a reminder to crypto hodlers to keep their funds offline, in cold wallets, and to employ sound security practices with respect to private keys. But the fact is that centralized exchanges remain crucial gateways between crypto and fiat, and offer important liquidity for crypto traders.

After the company’s security was breached, it became clearer than ever that even the best and most reputable exchanges are not 100% foolproof. There is a lot that the likes of Poloniex, Binance, and Kraken do right when it comes to security, but even that remains insufficient.


Can Multi-Factor Authentication Solve The Problem?

Most reputable exchanges require or recommend that users employ 2FA, whereby funds can only be withdrawn using something you know (email, password) and something you have (an authenticator account on a phone – or even a physical device – that generates a random number).

Multi-factor Authentication (MFA) calls for even further steps. 3FA, for example, requires you to add something you are to the things you have and know as an authentication factor. This factor requires additional authentication with a fingerprint, palm, retina, voice, or facial recognition.

Other factors may take into account location identification (somewhere you are) and gestures or actions (something you do) to allow you access.

But these come with their own problems. Location authentication measures are a nightmare to navigate for those who travel frequently. Geolocation technology could be useful here, restricting services if something geographically infeasible occurs. This would happen if, for example, you log into an account on one continent and do the same on another a few minutes later.


Why Aren’t Exchanges Better Equipped To Deal With Cyber Threats?

Some exchanges use additional security measures, such as multi-step procedures, withdrawal maximums, and enforced withdrawal delays. And it is certainly true that some hacks, such as the January 2018 theft of $500 million worth of NEM from Japan’s Coincheck, was due to poor security protocols. In Coincheck’s case, all the NEM it held were stored in a hot wallet.

After the Coincheck hack, a report by Dashlane found that more than 70 percent of all crypto exchanges had “unsafe password practices” and were vulnerable to attack. As Crypto Briefing has previously reported, the cryptocurrency and blockchain industry is still under-prepared for digital thefts.


Can Cryptocurrency Exchanges Be Insured?

Gemini proudly promotes the fact that user funds held in their hot wallets are insured against theft. Coinbase and Circle also have coverage in place, as does Australia’s Independent Reserve.

Yet insurance is not an industry-wide solution and creates a moral hazard. Knowing that their losses will be covered by the exchange may encourage users to behave carelessly, rather than deploying all the security tools at their disposal.


Are Decentralized Exchanges The Answer?

Overly zealous exchanges have been known to impose security measures on users without warning, effectively holding their funds to ransom. And on the outer fringes of the industry, the BitGrails of crypto keep rearing their heads, with lax security and appalling attitudes towards their users.

The promise of decentralized exchanges could be cause for optimism. Binance, ironically, stoked that fire by announcing the launch of its DEX, based on the BNB blockchain.

But for all they offer in terms of genuine peer-to-peer transactions, DEXs are incredibly difficult to keep liquid and may not emerge until after the demise of many of today’s altcoins. At that point, the crypto world is likely to need fewer exchanges, not more.

For all their flaws, the crypto industry is likely stuck with centralized exchanges, at least for the foreseeable future. Although markets like Binance and Gemini have done much to reassure frequent traders, for most of us, the best security is also the simplest: to store your own keys in an offline environment.

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Bitcoin’s rough week suggests market unready for primetime

And yet this superstar investor lost a jaw-dropping $130 million on Bitcoin. It’s a loss that raises fresh questions about the asset’s readiness for prime …

Last week was a rough one for crypto-currency enthusiasts. Just as Bitcoin was staging a return from the dead, news broke of yet another possible fraud at a digital money exchange.

Crypto-currencies plunged US$10 billion in market value after New York’s attorney general announced an investigation into Tether, a digital coin. The case alleges companies behind Tether and Bitfinex, one of the globe’s biggest crypto exchanges, used fancy footwork to hide an “apparent loss” of $850 million of co-mingled corporate and client money.

It’s the latest blow for an asset that since 2014 has ricocheted from crisis to crisis.

But another setback last week deserves even more attention. It involved Masayoshi Son, Japan’s second-richest man. The SoftBank billionaire is the world’s most influential venture capitalist, a man single-handedly shaking up the tech startup game.

And yet this superstar investor lost a jaw-dropping $130 million on Bitcoin. It’s a loss that raises fresh questions about the asset’s readiness for prime time.

Betting on Bitcoin

Son, as the Wall Street Journal tells it, loaded up on Bitcoin in late 2017, just as it was nearing an all-time high just shy of $20,000. He reportedly did so at the urging of Peter Briger of Fortress Investment Group, a company Son’s $100 billion Vision Fund acquired in 2018.

Fortress had been betting in Bitcoin since 2013 and was clearly ecstatic about its meteoric rally.

Yet Son buying into the frenzy near the very top tick dents his reputation as an astute long-term investor. Son gets considerable mileage from his reputation as the Warren Buffett of Japan. His own guru legend has grown since 2000, the year Son bet $20 million on an unknown teacher in the Chinese city of Hangzhou.

By the time Jack Ma’s Alibaba vision went public in 2014, Son’s stake was worth $50 billion.

Since then, Son has tried to recreate that magic. His bet on Bitcoin – how much we still don’t know – seemed a swing-for-the-fences ploy to protect his Buffett-like halo. That legend is part of why Saudi Arabia is bankrolling Son’s Vision Fund, handing him about $45 billion and hinting at more cash.

Son’s Bitcoin loss was with personal money, not SoftBank’s. Still, it’s an embarrassing blow to his street cred. And the timing couldn’t be worse.

Skeptics abound

In recent weeks, the VC-industry press pulsated with chatter that some Vision Fund backers were skeptical about Son’s huge bets on Uber, WeWork and other arguably overvalued Silicon Valley “unicorns.”

“The story unenviably undermines his reputation as a shrewd long-term investor,” said analysts at Zero Hedge. Son also made a splash on Twitter, where users added the #BITCOINSucker hashtag to his mentions. Adds financial consultant Arun Tikmani, Son “failed to heed Warren Buffett’s advice” about buying low and selling high.

And yet, Son’s loss reflects even worse on Bitcoin. When such a savvy value investor can blunder so stunningly and so quickly without a good explanation, the crypto-currency game has a serious problem.

Value investors are risk takers, sure, but they also appreciate markets having guard rails and clear protocols. The crypto world has few.

The emergence of new crypto-currencies – from Litecoin to Ripple to Ethereum – so vastly outpacing the market infrastructure is a recipe for disaster. As such, says Peter Mallouk, president of wealth manager Creative Planning, “there’s no way that even a fraction of them can survive.”

One mistake Son and his ilk may have made were thinking crypto assets were like more conventional ones. That’s an added level of risk.

“The argument here is that Bitcoin has gone through its bubble phase and is ready to rise phoenix-like from the ashes just as other assets and indices did in the past,” said Kevin Dennean, tech analyst at UBS.

He added that “maybe crypto bull contingents should consider what happens after the bubble. Not every bubble that bursts recovers the old highs.”

Latest scandal

The New York investigation into Tether is but the latest scandal to trip up the crypto world. Two of the biggest have been in Son’s Japan – one in 2014 at the Mt Gox exchange, one in 2018 at Coincheck.

Hackers also have reaped havoc at exchanges from South Korea to Thailand. Such snafus have China banning crypto trading, initial coin offerings and mulling a ban on Bitcoin mining.

Bitcoin’s recovery since March is a bit of mystery. Yet it’s rekindled the debate about whether the current price – about $5,000 – makes sense. Count Nouriel Roubini among those warning of irrational exuberance.

“There’s no good reason to turn bullish on crypto,” said one of the few economists who predicted the 2008 subprime crisis.

Leading Bitcoiners beg to differ. Hearing such views, said Los Angeles-based punter Stephen Cole, “helps remind me that Bitcoin is so revolutionary even smart and experienced people can completely misunderstand and miss out on it.”

Count Tuur Demeester, a founding partner of Adamant Capital, among those wondering why Son did not hang tight for a while. In a recent report, his team argues Bitcoin investors should be in a “heavy accumulation” phase.

They say Bitcoin may appreciate to $6,500 where “a new bull market permanently cements” crypto-currencies “as a multi-trillion-dollar asset class.”

Perhaps, but that gets us back to those guard rails. Buffett has long been on record dismissing the crypto boom. At Berkshire Hathaway’s 2018 annual shareholder meeting, Buffett said Bitcoin “is something where people who are of less-than-stellar character see an opportunity to clip people who were trying to get rich because their neighbor’s getting rich buying this stuff neither one of them understands.”

More recently, in February, he told CNBC: “It is a delusion, basically” that “attracts charlatans.” Agustin Carstens, head of the Bank for International Settlements, also views Bitcoin as a “bubble, a Ponzi scheme” that could put global stability at risk.

The same goes for investors – like Son – trying to figure out a market that participants are making up as they go along. In a Match 19 report, Bitwise Asset Management alleged that nearly 95% of Bitcoin trading volume was faked by exchanges to pad fees. “From a lay person’s perspective, that’s a confusing juxtaposition,” said Matt Hougan, global head of research for Bitwise.

Or, some of the world’s wealthiest investors. Look no further than SoftBank’s Son. When the savviest punters can fall so far and so fast without explanation, it’s time for an entire market to look in the mirror.

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The Need for a Crypto Regulatory Framework in Japan, Nikkei Asian Review’s Pesek Explains Why

Also serving as the CEO of SoftBank Group, which is currently valued at $100 Billion, many are questioning his decision to enter the crypto sphere, …
The Need for a Crypto Regulatory Framework in Japan, Nikkei Asian Review’s Pesek Explains WhyThe Need for a Crypto Regulatory Framework in Japan, Nikkei Asian Review’s Pesek Explains Why

It has recently been reported by William Pesek – from Nikkei Asian Review – that renowned Japanese investor, Masayoshi Son has lost $130 million of his own money due to investing in Bitcoin.

Also serving as the CEO of SoftBank Group, which is currently valued at $100 Billion, many are questioning his decision to enter the crypto sphere, amidst claiming that he has the nose for knowing which projects are surely to succeed in “10 or 20 years”.

Son’s first heavy investment was that of Alibaba, where his investment of $20 million in 2000 grew to $50 billion in 2014 when the firm went public. Other firms that he has since considered include Southeast Asia’s Grab and the popularly known Uber.

As per Pesek, Son is deemed Asia’s Warren Buffett and argues that Son’s loss could be due to his lack of understanding in cryptocurrencies – stating Buffett’s famous quote, “Never invest in something you do not understand.”

Japan: Crypto, Regulatory Frameworks and More

As countries around the world want to succeed and become the leader in any industry, especially that of technology, Japan too was making moves toward said goals. However, they have had difficulties, and examples of this include the Mt. Gox hack in 2014 and the more recent, Coincheck hack of 2018 (roughly $1 Billion loss at the time of hack).

This leads to the need to have a regulatory framework argues Pesek. Some of the cases made include confidence, which comes from providing assurances to investors, making sure that the digital asset-to-traditional money conversion is smooth, increased transparency and increased action taken against illegal activities, i.e. hacking and money laundering.

The country has gotten the Financial Services Agency to look into regulations and to further investigate the legitimacy of existing crypto exchanges. Pesek anticipates that a clear foundation to a potential regulatory framework will be announced sometime in June, which is the same time in which the G20 countries will be discussing crypto and blockchain technology.

As previously reported by Bitcoin Exchange Guide, Asian countries, including China, India, South Korea, Japan and Indonesia, will be regulating crypto, while highlighting the need to protect investors and seeing how the market impacts each country’s overall economy. In addition, Pesek quoted SankeiBiz, who have since noted that the G20 country, “can use the regulations, such as measures to prevent the outflow of virtual currency.”

Current Crypto Stance of Japan’s Neighbors

Interestingly, it has been noted that Japan cannot strive on its own and that other Asian countries’ involvement in crypto currency is essential. Here’s what Pesek elaborated upon:

“China’s aversion matters because, at bitcoin’s heyday, the mainland was home to nearly 90% of trades and roughly 70% of mining activity. For all its enthusiasm to become crypto-central, Japan lacks the scale to revive the market unilaterally. So, keeping China in the game is crucial.”

While Japan, Thailand and South Korea are leaning towards the acceptance of crypto-related services, it has been noted that the likes of China, and India are leaning more towards banning crypto – something to consider in terms of the overall Asian crypto participation.

Pesek ends his arguments by indicating that if a top shot investor like Son:

“Japan’s second-richest man, can stumble so spectacularly and quickly, bitcoin has a problem.”

This seems to be a contradiction to his original statement that if you don’t have knowledge then you shouldn’t be investing in it to begin with. This could be the case for Son.

Furthermore, big shots like Buffett himself have missed out on jackpots. Speaking of Buffett, who also happens to be the CEO of Berkshire Hathaway, he has always been wary of the crypto sphere – publicly sharing that:

“There is nothing being produced in the way of value from the asset.”

However, Buffett has been brought up in the past for having failed to predict the height that Google and Amazon have reached in today’s society. During the Berkshire Hathaway 2018 annual shareholder meeting, Buffett openly shared:

“I made the wrong decisions on Google and Amazon. I made the mistake in not being able to come to a conclusion where I really felt that the present prices that the prospects were far better than the prices indicated.”

Ultimately, one shouldn’t be reasoning that a regulatory framework needs to be place because “big shots” have lost big sums, but instead should look closely at the aforementioned hacks and scams that have occurred and its effect on the economy and its people.

What are your thoughts on some of the arguments made in relation to Japan and how the country needs to implement a regulatory framework? Let us know in the comments below.

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