NZ crypto exchange offline after hack, talk of $3.7m heist

Author
Chris Keall,
Section
World,
Publish Date
Wednesday, 16 January 2019, 10:06AM
Cryptopia founders Adam Clark and Rob Dawson. Photo / Supplied.
Cryptopia founders Adam Clark and Rob Dawson. Photo / Supplied.

Christchurch-based digital currency exchange Cryptopia was still offline for maintenance early this morning after a digital break-in - and industry talk of a $3.7 million heist.

At 7.55pm last night, Cryptopia tweeted that it was down for unscheduled maintenance.

Shortly after, it elaborated in a tweet that "Yesterday, 14th January 2014, the Cryptopia Exchange suffered a security breach which resulted in significant losses."

The exchange did not put a figure on the hack, and did not respond to Herald inquiries last night.

But one industry expert pointed to crypto transaction monitoring services, including "Whale Alert," which highlighted that US$2.5m ($3.7m) in a digital currency called Ethereum was transferred to an unknown wallet.

Athorities are in the early stages of investigating the incident.

Police said in a statement, "A significant value of crypto-currency may be involved and Police are taking this very seriously.

"We are currently talking to the company to gain a further understanding of what has occurred.

"A dedicated investigation team is being established in Christchurch including specialist police staff with expertise in this area."

Crypto exchanges are used to buy and sell digital currencies and have usually also offered the option to store coins online for users.

Cryptopia, founded three years ago by Christchurch men Rob "Hex" Dawson and Adam Clark, said it had grown from two to 50 staff in the year to January 2018 as the cryptocurrency craze hit its height. They said they had 1.4 million users worldwide.

The exchange trades a number of digital currencies including Bitcoin and Ethereum.

Ethereum is the most established of a crowded fielded of alternative virtual currencies to Bitcoin, and has experienced a similar crash in value over the past year. After soaring close to US$1500 in early 2018 one Ethereum "coin" is now worth around US$126.

Beyond the crash in value, cryptocurrencies have struggled with the fact that there is no well-established alternative to the deposit insurance or government guarantees that secure traditional bank accounts.

One commentator called the lack of deposit insurance the crypto industry's "Achilles' heel".

Digital currencies have strong security measures built in, but there are several ways stage an online heist, including obtaining the login to a user's account.

And while Cryptopia has the dubious distinction of being the first exchange to be targeted in 2019, online heists have been common over the past five years.

CNBC reported that US$1.1b in cryptocurrency was stolen in the first half of 2018.

Some exchanges guarantee funds and have attempted to refund users - only to hit the wall financially.

Tokyo-based Mt Gox, the largest bitcoin exchange at the time, was the first high-profile hack in cryptocurrency history. It filed for bankruptcy in 2014 and said it lost 750,000 of its users' bitcoins and 100,000 of the exchange's own.

In January 2017, hackers stole US$530 million worth of a lesser-known cryptocurrency called NEM from Japanese exchange Coincheck.

In December the same year, a South Korean cryptocurrency exchange called Youbit lost 17 per cent of its digital assets. Its parent Yapian later filed for bankruptcy.

The Mt Gox hack was a blow to the liquidators of New Zealand-registered Bitcoinica, which ran online currency and bitcoin trading platform and had digital currency worth (then) $43m frozen in the Japanese exchange.

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