Business / Financial Markets

Japan's Financial Services Agency criticizes hacked crypto-exchange over lack of details on $62 million theft

Reuters

Cryptocurrency firm Tech Bureau Corp. has failed to provide adequate details on how thieves hacked into its exchange to steal ¥7 billion ($62 million), or explained its delay in reporting the hack, the country’s financial regulator said on Tuesday.

The Financial Services Agency issued a business improvement order to the Osaka-based firm ordering it to provide details how the theft occurred and how it would compensate clients. It was the third business improvement order served on the firm.

Tech Bureau said last week its Zaif exchange was hacked and ¥7 billion worth of bitcoin and other cryptocurrencies were stolen.

“We have not received enough explanation on what exactly happened. What they told us is an employee’s PC was hacked,” a senior official at the agency told reporters at a briefing.

The official, who declined to be identified, warned that further action could be taken against the company if needed.

Tech Bureau has said its exchange was hacked over a two-hour period on Sept. 14. It detected server problems on Sept. 17, confirmed the hack the following day, and notified authorities.

One of the business orders served on Tech Bureau earlier this year had required the firm to rectify its computer system risk management.

“It is extremely regrettable that such an incident happened when (Tech Bureau) was given two business improvement orders,” the FSA official said.

Reached by phone, Tech Bureau officials said they would only answer media inquiry by email but a reply to a message seeking comment went unanswered.

The country’s crypto-exchanges have been under close regulatory scrutiny after the theft of $530 million in digital coins at Tokyo-based cryptocurrency exchange Coincheck Inc. in January. Coincheck has since been acquired by Japanese online brokerage Monex Group Inc.

Japan last year became the first country to regulate cryptocurrency exchanges, as it encourages technological innovation while ensuring consumer protection. Exchanges have to register with the FSA.

The FSA said earlier this month that more than 160 entities have expressed interest in entering the cryptocurrency exchange business but it has not issued any approvals since December last year.

The senior FSA official said the agency would not stop the screening process of new entrants in the wake of the Tech Bureau incident.