Last week, $534 million worth of XEM, the native cryptocurrency of NEM, were stolen from Japanese cryptocurrency exchangeCoincheck, one of the largest in the country.
Here’s the official statement from NEM.io Foundation Vice President Jeff McDonald with the recent massive hack:
The NEM Foundation is working on solutions to do the most we can to help CoinCheck and also ensure the NEM community is protected. Due to the nature of NEM’s architecture and its advanced API, we are currently reaching out to exchanges and exploring three different options. Due to the exact nature of these options and the security concerns around them, we have no further comment on how we are actively working to address this situation at this time. We hope everyone can understand that while we believe the community deserves to know everything we are doing, we also believe it is in the community’s best interest to not publicly discuss the full detail our actions considering the security needed around our solution.
We also have a full account for all of Coincheck’s lost XEM on the blockchain. At this time, the hacker has not moved any of the funds to any exchange, nor to any personal accounts of NEM community members.
Stolen funds can be traced on the NEM blockchain thanks to its security protocol
NEM is creating an automated tagging system that will be ready in 24–48 hours. This automated system will follow the money and tag any account that receives tainted money. NEM has already shown exchanges how to check if an account has been tagged. So the good news is that the money that was hacked via exchanges can’t leave.
The decentralised NEM protocol’s flexibility allows transactions to be traced in real-time, which aids exchanges to identify wallets attached to malicious activity. Stolen XEM tokens effectively unusable, because they cannot be deposited without being flagged by NEM. The NEM blockchain platform itself remains secure, and all NEM mobile wallets and NEM Nano Wallets remain secure and intact.
Coincheck to refund all customers affected by hack
On January 26, 526 million XEM were reported missing from wallets on the Japanese cryptocurrency exchange Coincheck due to a massive security breach of the Coincheck wallet. The NEM Foundation’s automated tagging system, making use of the decentralised API, tracing stolen funds from the hack, with the objective of identifying wallets holding stolen funds.
Meanwhile, Coincheck confirmed its intention to refund the stolen money to the affected 260,000 users. According to the announcement, the refunds will be done using the exchange’s own capital.