Biggest Crypto Heists in History Ranked
Coincheck, a popular Japanese cryptocurrency exchange, announced on Friday the 26th of January 2018 that they had fallen victim to a hack. The hackers stole half a billion dollars' worth of the virtual currency NEM.
This theft is the largest crypto heist in history, eclipsing the 2014 hack of Mt. Gox that saw the exchange lose $480,000,000 worth of Bitcoin (850,000 BTC) to hackers. The monster hack ushered in a bear market in cryptos that would last until late 2016. Mt. Gox was ruined by the 2014 hack and subsequently filed for bankruptcy in both Japan and the United States.
It's Different This Time
Coincheck has taken a different approach to their security breach. In a press conference held by Coincheck management to announce the details of the hack, the company's directors have vowed to refund all of their client's losses.
While this strategy did have a positive effect on calming investor confidence in the sector, Coincheck made no official statement about whether their clients would receive the funds in fiat currency or virtual tokens.
Coincheck also stated that they have worked with NEM developers to create a tracking system to tag all of the stolen NEM coins. The tagged coins will be viewed as tainted funds by all major exchanges, which will flag any deposit or withdrawal of hacked NEM coins on regulated trading exchanges. This strategy will prevent the stolen funds from being converted to fiat currency or exchanged for different coins, such as BTC.
The Crypto Hack List
There have been seven huge hacks of exchanges where the losses have been in the tens of millions or hundreds of millions of US Dollars.
- Coincheck – $500,000,000
- Mt. Gox – $480,000,000
- Parity Wallet – $155,000,000
- Bitfinex – $65,000,000
- Nicehash – $63,000,000
- Dao – $50,000,000
- Tether – $31,000,000
Can Exchanges be Trusted?
There are speculation and suspicion in the crypto market that suggests the major exchanges may be actively involved with these hacks. While there may not be concrete evidence to support these theories, the coincidences surrounding the hacks and the financial solvency of exchanges have come under scrutiny.
After the Mt. Gox hack, it was revealed by insiders that the hack of the exchange occurred in 2011. The allegations suggest that the Mt. Gox management team led by their CEO, the French national Mark Karpeles, decided to keep the hack from public knowledge until late 2014.
The Japanese police issued a statement that noted they believe that someone working at the exchange initiated the hack. Karpeles was charged by Japanese authorities for embezzlement and price manipulation in July of 2017. He appeared in court and fiercely denied any charges against him.
The Bitfinex and Tether hacks have also undergone tremendous suspicion by the crypto community. Bitfinex lost $65,000,000 of the virtual currency in a hack announced in August of 2016. In the wake of the theft, Bitfinex did not return customer funds but issued a virtual token, BFX, to their customers to compensate them for their losses.
Bitfinex clients were encouraged to either take an equity stake in the company or tokens to the equivalent of their Bitcoin losses. Over 60% of hack victims chose to take equity in Bitfinex, a move which would be questioned by any sophisticated investor.
The crypto watchdog @bitfinexed has accused Bitfinex of starting a Ponzi scheme with Tether. The “scam” involves Bitfinex pumping the market with freshly printed Tethers to raise the Bitcoin price, known as a “pump and dump.”
The same exchange has also been accused of wash trading, a practice of traders selling to their own orders. Their alleged market manipulation tactics also include “spoofing,” i.e., placing orders to give the illusion of trading volume, only to withdraw the order as traders enter the market.
The Future for Crypto in 2018
Cryptocurrency is hailed as being a decentralized and unregulated financial solution that is free from government and central bank manipulation. However; unregulated markets such as cryptocurrency may offer even more risk to investors and speculators. Can the exchanges be trusted? Or will they be the undoing of the entire crypto ecosystem? Time will tell, and 2018 is set to be a fascinating year for Bitcoin and cryptocurrency.