At the beginning of September, leading Japanese crypto exchange Zaif lost $60 million worth of crypto in user funds in a hack.
The Financial Services Agency (FSA), the dominant financial regulator of Japan, has noted that it is remorseful of letting Zaif carry on its operation following the two warning was given to the exchange to greatly upgrade its system.
“It is extremely regrettable that such an incident happened when (Tech Bureau) was given two business improvement orders,” an FSA official noted.
The Japanese government officially started an investigation into Zaif on September 24 to assess the method of hacking attack used to hack the exchange and the weaknesses the exchange had to deal with to stop such cases to happen in the future again.
Before the hack, the FSA released two business improvement orders to Zaif, which basically were forewarnings to update their internal management system and security measures to make it possible for its system to operate with the risk of being hacked.
But, the exchange was unable to abide and make the needed upgrades to its infrastructure. It is yet to be known whether the exchange just did not have the finances and manpower to make the needed changes to its infrastructure or simply did not wish to make the changes.
Following months after the business improvement orders were released, the exchange experienced a $60 million hack, making it the second high profile crypto exchange to be hacked, following the $500 million security breach of Coincheck.
For the time being, the FSA and cybersecurity agencies believe the cause of the hack to be a hacked employee, PC, a technique used by a couple of fraudsters who breach into the internal management system of Bithumb and got away with millions of dollars in crypto including customer information on the Bithumb platform.
“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 FSA noted.
The FSA and the Japanese government have already updated the process of paying investors that were affected by the hack. Shortly after the hack, recognizing that it cannot compensate $60 million to its investors, Zaif made a deal with publicly-listed technology corporation Fisco.
Fisco is expected to compensate more than $40 million in the subsequent weeks on behalf of Zaif in return for a majority stake in the crypto exchange.