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FSA Told Coincheck To Fix Security Prior To Theft; Visits Exchange’s Office




Japan’s Financial Services Agency surprised the operators of Coincheck with an unannounced visit to the cryptocurrency exchange’s office, and said that it had warned the firm to beef up its security measures in advance of the theft of over 500 NEM tokens in January.

Ten officials with Japan's Financial Services Agency (FSA) paid a surprise visit to the office of Coincheck, the cryptocurrency exchange that was recently robbed of 523 million NEM tokens (known as XEM), on February 2.

The agency says that it had instructed the company to fix certain security flaws before the theft took place. By law, the exchange, which had applied to the FSA for approval to operate, was allowed to continue serving customers while its application was pending. The regulator said that the persistence of the vulnerabilities which it had diagnosed were among its reasons for not granting Coincheck a license.

Friday's unannounced inspection was, at least in part, intended to help the agency ascertain the firm's ability to reimburse affected customers approximately $421 million (at press time) with company funds, as it had promised to do in an online statement. According to the FSA, it is not yet certain whether Coincheck has that amount of money at its disposal.

The officials who dropped in may have also been after information that the regulatory body was unable to obtain in an interview-based hearing that it reportedly conducted with the exchange. One Japanese newspaper apparently reported that Coincheck had turned over some records to police.

According to Finance Minister Taro Aso, the purpose of the inspection was to "ensure protection of users."

Last week, the FSA related that it would conduct hearings with other digital asset exchanges and possibly follow those up with office visits. On the day that it sent officials to Coincheck's premises, the agency also announced that it had ordered all exchanges operating in the country to submit reports detailing their risk management infrastructure.

The day before, Takao Asayama of the NEM Foundation said that authorities in other countries, which he declined to name, are investigating the theft as well.

Adam Reese

Adam Reese is a Los Angeles-based writer interested in technology, domestic and international politics, social issues, infrastructure and the arts. Adam holds value in Ether, Bitcoin, and Monero.

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