SK Regulators Receive Criticisms for Multiple Exchange Hacks

The South Korean government has been criticized for being unable to prevent multiple hacking incidents. Three cryptocurrency exchanges lost nearly $1 billion to hacks even after going through an inspection by the regulators. Meanwhile, Upbit denied hacking speculations.

The local media reported on Monday that the Ministry of Information and Communication, the National Police Agency, the South Korean Ministry of Science and Technology, and the Korea Communications Commission (KCC) have submitted data on crypto exchanges hacks to the National Assembly.

According to the Korea Daily, the National Assembly’s Science and Technology Information and Communications Commission member Min Kyung-wook said the data includes seven hacking incidents which resulted in the loss of 128.8 billion won or around $115 million in digital currencies.

The news outlet detailed that the government performed a security check on 31 crypto exchanges, adding that ten of them were inspected from September to December 2017, while the other 21 between January and March 2018.

The authorities ordered the exchanges to improve some areas such as the “lack of information security system such as firewall, lack of system access control, [and] insufficient malicious code prevention.”

Out of the overall damage, 110 billion won or roughly $98.5 million in crypto were siphoned off from three exchanges. The publication mentioned that the three “were hacked even after receiving government security checks. The government has been criticized for not being able to take effective measures against the exchange security problem.”

Youbit is the first of the three. It was inspected on October 26 and 27 last year but was hacked two months after on December 19, losing around 25.9 billion won or about $23.2 million.

On June 10, Coinrail which was inspected on February 8 and 9 was hacked with damage of approximately 53 billion won or $47.5 million.

The government inspected Bithumb twice, on November 29 and 30 and again on February 22 and 23. It suffered a security breach on June 19, losing around 35 billion won or $31.4 million. However, the exchange lowered its loss estimate to around 19 billion won or $17 million a few days after.

“The hacking incidents occurred even at the places where the government directly conducted security checks,” lawmaker Min said criticizing the government.

Noting that “the government has not yet made clear rules for cryptocurrencies,” Korea University’s Information Security Graduate School Professor Lim Jong-in asserted that “as Bithumb and other exchanges act as financial institutions, in reality, the government should set up a regulatory system based on this.” 

After several security breaches, all eyes are on one of the country’s top exchanges by volume, Upbit. The public has been suspecting that the Kakao-backed exchange has also been hacked. However, the exchange denied it, publishing a statement on July 8:

“Your assets held at Upbit are kept secure…The large amount of coins movement found through communities is part of [us] upgrading the wallet management system, and the work is done under the tightly managed security environment of Upbit…We hope that your investment will not be harmed due to false rumors.”