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Japan: FSA visits Tokyo office of Coincheck over ¥58 billion hack

FSA staff members visited the headquarters of Coincheck in Shibuya Ward on Friday over a hack on January 26 (NHK)

TOKYO (TR) – Japan’s Financial Services Agency (FSA) on Friday inspected the Tokyo headquarters of cryptocurrency exchange Coincheck over a hack that resulted in the loss of 58 billion yen in digital currency one week ago, reports NHK (Feb. 2).

At around 8:00 a.m., FSA staff members entered the Shibuya Ward headquarters to check whether sufficient funds had been allocated for compensating victims of the hack while also assessing if the company separately manages the funds of the company and those deposited by customers.

In addition, the FSA ordered domestic cryptocurrency exchanges to provide information on their risk management systems as related to the protect of customer assets.

“Today, we are undertaking an on-site inspection of the company based Payment Services Act,” said Taro Aso, the Minister of Finance.

The hack took place early on January 26. According to Coincheck, unauthorized access took place in its system just before 3 a.m. The access was discovered by the company at around 11:00 a.m. that same day. The company then suspended trading of NEM.

According to a previous report, sources with knowledge of the matter said that the hack was the work of persons posing as affiliated parties of Coincheck. It is possible that the perpetrators used servers in Eastern Europe and other areas.

On Sunday, Coincheck revealed that it would reimburse roughly 260,000 victims a total of 46 billion yen. The following day, the FSA issued a business improvement order to the exchange. The agency said the company failed to implement measures to prevent the hacking.

Coincheck’s failure was the fact that it did not isolate cryptocurrency held by customers from outside networks to prevent illegal access. In the past, the FSA raised concerns with the exchange about its protocol.