South Korean Bitcoin Exchange Yapizon Hacked; $5 Million Stolen

Yapizon, a South Korean Bitcoin exchange suffered a massive data breach earlier this week when hackers stole 3816.2028 Bitcoin (US$5 million) which is 37% of user funds.

According to the official statement from the exchange in the Korean language, the attack took place on Saturday, April 22, 2017, when a hacker compromised four of the exchange’s hot wallets. A hot wallet refers to a Bitcoin wallet that is online and connected in some way to the Internet.

As if the data breach wasn’t enough to annoy users the exchange has decided to use 37 percent of user balances to accommodate the 37 percent loss in the incident. But to compensate the loss, the exchange is also planning to issue ‘Fei’ tokens to “priority members.” Fei is a service product that the exchange has been trading since 2014.

“After many discussions, legal and accounting consultations and reviews, we have come to the conclusion that losses incurred in this case should be fairly applied to all members. It is also the most common way to go through the liquidation process,” said the statement.

This is the same strategy used by Bitfinex Exchange back in 2016 when its hot wallets were compromised in which $70 Million worth of Bitcoin was stolen. In return, Bitfinex issued BFX tokens. However, this move is controversial because of the difference in the financial status of Bitfinex and Yapizon.

As of now, it is unclear who is behind the breach or how the wallets were accessed, however, the company has denied that any insider was involved in the event. The statement affirms that Cyber Investigation Division of Seoul Police Station and Cyber Investigation Division of Seoul Metropolitan Police Agency have been informed and are conducting an in-depth investigation.

“Expect more trading or exchange sites in any part of the world will report on hacked attack because of the price hike. We can’t tell exactly if they are hacked or on the other side run away with the funds of their users/members. So beware and be careful,” said bL4nkcode, a senior member of BitcoinTalk forum.

It’s 2017, yet there is no proper regulation for cryptocurrencies in South Korea despite the fact that South Korean Financial Services Commission had vowed to implement cryptocurrencies related laws in 2016 to protect users in case of a data breach.

At the time of publishing this article, Yapizon exchange was offline however you can read the official statement in the Korean language by following this link.


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Waqas

Waqas Amir is a Milan-based cybersecurity journalist with a passion for covering latest happenings in cyber security and tech world. In addition to being the founder of this website, Waqas is also into gaming, reading and investigative journalism.