Expert says half of stolen NEM likely converted on darknet; Coincheck drops Monero, Dash and Zcash


Hackers may have converted half of the NEM cryptocurrency stolen from Tokyo-based Coincheck Inc. into other types of virtual coins for money laundering purposes, a cybersecurity expert said Saturday.

Japan Digital Design Inc. Chief Technology Officer Masanori Kusunoki said: “It has become evident we cannot block currency laundering just because all transactions are recorded.”

The converted coins may have been converted into other virtual currencies or hard cash through the darknet, making it even more difficult to track them. The stolen coins were worth ¥58 billion ($547 million) at the time of the heist.

The hackers set up a site on the darknet for trading virtual currencies and began converting the NEM coins on Feb. 7. Transactions are still being made on the website, suggesting that more of them could be laundered and become impossible to trace, the expert said.

In the meantime, Coincheck is expected to stop handling three virtual currencies that provide high levels of anonymity, sources said.

Coincheck now recognizes the high risk posed by the three currencies when used in money-laundering transactions, the sources said.

The three are Monero, which trades under the symbol XMR, Zcash, which trades as ZEC, and Dash (DASH).

The recipients of funds denominated in these currencies cannot be identified on their blockchains, which makes it easier to engage in money laundering than with Bitcoin, NEM and other currencies.

Some industry experts say North Korea has been using Monero to obtain foreign funds.

Coincheck is considering buying the currencies in question from customers who agree to sell them at a fixed price, and accepting transfers from Coincheck accounts whose owners have been verified, the sources said.

Coincheck’s application to be registered as a cryptocurrency exchange under the revised payment services law has been pending since it was submitted to the Financial Services Agency in September. The screening is taking more time than expected partly because Coincheck handles digital currencies whose owners are anonymous.

In the wake of the massive hack in January, Coincheck suspended cryptocurrency withdrawals and trading. On Monday, it resumed trading in cryptocurrencies excluding Monero, Zcash and Dash.

On Tuesday, Coincheck said it had refunded more than $440 million to customers, using its own funds to reimburse about ¥46.6 billion ($440 million) to all 260,000 customers who lost NEM.