Japan FSA Regret Not Suspending Exchange Post Cyber Attack

This month, a popular Japanese-based digital asset exchange called Zaif lost investor funds worth $60 million due to a cyber attack. Japan’s financial authority, the FSA, expressed a deep regret for permitting the exchange to continue operations since issuing two previous warnings directed towards improving the platform. An FSA spokesperson explained their immense regret for the occurrence of the attack seen as though the exchange had been issued company improvement warnings twice. 

Cyber Attack Hits After Two FSA Warnings Issued

Japanese authorities officially began investigating Zaif as of the 24th of September in order to discover the methods utilized to breach the exchange’s network and whether such vulnerabilities were in part due to the company’s lack of responsibility as well as how to prevent such events in the future.  

Before the major attack, Japan’s FSA hit Zaif with two warnings regarding business improvement in order to secure the platform’s system and take action towards ensuring their operating system was not at risk. Unfortunately, the crypto exchange was not complacent and did not take the warnings into immediate action. It is undetermined as to whether Zaif lacked resources necessary to resolve network issues or whether the issues were not prioritized as they should be.  

Investigations are underway, however, recent updates lead officials to believe the source of the hack was originated from a PC belonging to an internal employee, a similar method used to attack Bithumb in which hackers were able to access millions worth of cryptos in addition to user data.

According to a senior member of the FSA, there is not enough conclusive information regarding the hack however it has been determined that an internal employees station was infiltrated. Investor compensation has been underway, and although the exchange is unable to pay back the total loss, a signed agreement was established with Fisco to help repair financial damages. The agreement ensures a supplement of $40 million towards the exchange’s debt in exchange for a majority stake in the company.  

Suspension On the Rise

Looking back on recent events, the FSA has noted that under investor protection laws, the digital asset exchange was eligible for suspension due to the recurring need to issue security warnings. Through FSC investigations in South Korea, all exchanges were put under the spotlight concerning security measures with companies such as Bithumb being forced to halt all operations until improvements were up to standard. Over twenty different exchanges within the country were issued regulatory orders to investigate their systems during a thirty day period.

Currently, the FSA in South Korea must filter through over 100 applications from local businesses hoping to legally function as digital asset exchange platforms. Based on previous hacks, the organization will likely filter out businesses displaying low-level security systems in order to improve the Asian financial market at large.

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