Business

Police question Japanese man over Coincheck cryptocurrency theft

Kyodo

A Japanese man has been questioned in connection with last month’s massive theft of digital tokens from cryptocurrency exchange Coincheck Inc., a source close to the investigation said.

The police learned that the man converted a small amount of the missing NEM coins into another form of cryptocurrency called litecoin through a site on the darknet, which can only be accessed through special anonymity software, the source said Saturday. The man was aware the NEM had been stolen from Coincheck.

About ¥58 billion ($533 million) worth of NEM was stolen on Jan. 26, with more than ¥500 million worth of it likely to have since been converted into bitcoin and other cryptocurrencies, according to data security experts.

The NEM was split up and dispersed to several digital addresses.

The Metropolitan Police Department’s cybercrime division, which questioned the man on a voluntary basis, suspects several people were involved in converting the stolen NEM and is monitoring darknet sites and NEM transactions to identify them, the source said.

Following the massive theft of the digital money, data security specialists found an account believed to have been used by one of the perpetrators to trade the stolen NEM on the darknet.

Their analysis of money transfers from the account showed that NEM cryptocurrency worth more than ¥500 million was withdrawn on more than 200 occasions between early Thursday and Friday evening, based on the exchange rate at the time of the hacking attack.

Based on the current exchange rate, the converted currency is worth over ¥300 million, they said.

NEM.io Foundation, a Singapore-based nonprofit organization promoting NEM, has tagged the stolen NEM to make it easier to track.

But “the tracking speed by the foundation is too slow” to prevent the perpetrator’s conversion, said Takayuki Sugiura, a representative from L Plus, a Tokyo-based information and technology consulting firm. “Urgent steps have to be taken.”

Some 260,000 holders of NEM have fallen victim to the security breach targeting Coincheck’s coffers. Since the heist, Coincheck has suspended most of its services.

The company said Friday it will resume services to allow yen withdrawals starting Tuesday. But it remains unclear when its clients will be able to withdraw or trade cryptocurrencies other than the NEM deposited at the company.

In Japan, there are 16 registered exchanges and another 16 awaiting approval, the latter including Coincheck, according to the Financial Services Agency. Exchanges are required to register under the revised funds settlement law that took effect last April.

Since the breach at Coincheck, the FSA has begun checking their the risk-management systems of virtual-currency exchanges, Financial Services Minister Taro Aso told reporters Friday. All exchange operators in Japan were due to report to the FSA by Feb. 2 on how they manage risks to protect customer assets.

Aso said the FSA decided to inspect them after looking into their reports.