South Korean Bitcoin Exchange Bithumb Hacked
Financial news website CCN reports, “Bithumb, the largest bitcoin exchange in South Korea alongside Upbit, has been hacked for around $20 million. The company said that user funds stored in crypto cold storage wallets were not hacked, but corporate funds were moved.”
The CCN report, authored by Hong Kong-based finance and cryptocurrency analyst Joseph Young, further points out that according to Bithumb, the hack is most likely an inside job. Joseph Young writes, “In a surprising turn of events, Bithumb disclosed that it believes the hack was an inside job and funds might have been moved by individuals associated with the company.”
The report also points out that this hack has come less than nine months after the 2018 hack at Bithumb and in just about a year since a massive hack hit Japan’s biggest exchange Coincheck. Bithumb has reportedly joined hands with Korea Internet & Security Agency (KISA), Cyber Police Agency and security companies, and has initiated intensive investigations. The company has clarified that at the same time it’s “…working with major exchanges and foundations” and expects “…to recover the loss of the cryptocurrency equivalent.”
KISA, which had earlier investigated all South Korean bitcoin exchanges to assess security measures and detect potential vulnerabilities, had found that most of them had weak security systems in place. But Bithumb, Upbit, Coinnest, Korbit, Coinone, Coinlink, Coinplug and Huobi were cleared by the agency for having robust security and internal management systems.
Anyhow, Bithumb, as per reports, has admitted that the company failed to take into account the possibility of an inside attack, involving employees or contractors who could breach into the company’s system and steal millions of funds held by it.
CCN quotes from the Bithumb official statement- “Bithumb exchange is certified ISMS and applied to multi-signature withdrawal scheme. We constantly monitor and block external hacking. However, it was our fault that we only focused on defense of outside attack and lack of verification of internal staff.”
Post the attack, Bithumb has decided to essentially overhaul its internal workforce verification system and impose restrictions on the authority employees and contractors have over the company’s internal management system.
However, since Bithumb had stored most of its user funds in cold storage wallets, the damage due to the hack remained limited. Cold storage wallets, as we know, are offline cryptocurrency wallets which many exchanges utilize as they help protect user funds whenever there are security breaches. Hackers cannot access these cold storage wallets and hence user funds were not lost in the Bithumb hack. Moreover, Bithumb has clarified that since the stolen funds were reportedly sent to other exchanges, they can be frozen immediately and thus probably recovered.
This recent Bithumb hack raises questions as to what measures cryptocurrency trading platforms could possibly adopt to protect themselves from such hacks which could happen due to the involvement of insiders- employees, contractors etc.