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Bitcoin tumbles after Korea’s biggest hacking

June 12,2018
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An electronic board at a cryptocurrency exchange in Jung District, central Seoul, on Monday shows the price of bitcoin and other cryptocurrencies dropping. [YONHAP]
The value of bitcoin dropped below 8 million won ($7,444) for the first time since April after news of the biggest hacking of a cryptocurrency exchange in Seoul that cost investors 40 billion won.

On Monday, Coinrail, the seventh-largest cryptocurrency exchange in Korea, declared on its website that it was checking its system due to a hacking attempt made early Monday morning.

The hacking is believed to have taken place around 1 a.m. and the alleged hacker extracted 3.6 billion coins for 40 minutes. That’s around 30 percent of the coins owned at Coinrail. The damage is estimated at around 40 billion won with Pundi X tokens taking the biggest hit.

Coinrail said it had succeeded in securing 70 percent of its crypto coins and tokens and relocated them to a so-called cold wallet, hardware storage that is kept offline.

Coinrail also said it put a trading freeze on the tokens - Pundi X, Aston and Nper - that were potentially exposed to the attack.

The exchange said it is working with local authorities including the Korea Internet and Security Agency, which investigates such crimes, in recovering the remaining one-third.

“We are currently verifying the exact extent of the damages of the exposed coins or tokens, which would take some time as we are cooperating with the related coin companies,” the notification stated.

In Seoul, bitcoin traded around 7.49 million won on Monday, which is roughly 7 percent lower compared to Sunday. In the global market, it was being traded for $6,805, down 7.11 percent. Other cryptocurrencies saw their value drop as well with Ethereum and Ripple falling between 6 and 8 percent.

This is not the first time that a Korean cryptocurrency exchange has been hacked. In April 2017, Yapizon was hacked, resulting in losses of 5.5 billion won. At the time 3,931 bitcoin were extracted, which were 37 percent of Yapizon’s total assets.

KISA concluded that the hacking was committed by North Korean hackers.

Coinis was another Korean cryptocurrency exchange that was hacked last Nov. 1, resulting in a 2.1 billion won loss.

Then in December, Yapizon, which at the time changed its name to Youbit, fell victim to another hack that resulted in a 17 billion won loss, which was 17 percent of its total assets. Youbit folded due to the second attack.

Hacking of cryptocurrency exchanges has occurred in foreign markets including Coincheck in Japan in January and Italy’s BitGrail in February.

But until Monday, the biggest hack was against Japan’s Mt. Gox in February 2014 when it lost 744,408 bitcoins valued at $350 million at the time. Mt.Gox was the biggest bitcoin exchange in the world but went bankrupt over compensation for the hack.

The hacking of Coinrail is likely to cause controversy as it turns out the company deleted a provision on compensating its clients from its standard contract.

In April, the Korean Fair Trade Commission ordered the 12 cryptocurrency exchanges in Korea, including Coinrail, to make changes to their contracts’ compensation provisions to state that if losses occur from hacking or other irregularities including fraud, the customer will be compensated in cash rather than cryptocurrency or digital points. Other exchanges including Bithumb made the changes last month while Coinrail deleted the compensation provision altogether.

BY LEE HO-JEONG, KO RAN[lee.hojeong@joongang.co.kr]