Bithumb $31 Million Crypto Exchange Hack: What We Know (And Don’t)

On Wednesday, roughly 35 billion Korean won (around $31 million) in cryptocurrency was stolen by hackers from the South Korea-based exchange Bithumb.

Although the breach may not be as severe as the $530 million hack of the Coincheck exchange earlier this year, the fact that Bithumb now ranks as the sixth biggest trading venue in the world still marks it as a notable, and worrying, incident.

While more details about the heist have surfaced in the hours following the event’s confirmation, providing a glimpse into Bithumb’s internal operations, some important questions about the hack still remain unanswered.

Here’s what we know about the hack so far, and some details we still don’t.

What we know

XRP compromised

While Bithumb has not yet disclosed full details of the stolen coins, news emerged following the hack that XRP, the native token of the XRP ledger and the world’s third-largest cryptocurrency, has been targeted, according to a report from CoinDesk Korea.

Based on data from CoinMarketCap, Bithumb accounted for 10 percent of the global trading volume of XRP over the last 24 hours, with a total of $32 million-worth changing hands.

Bithumb has so far not responded to CoinDesk’s request for comment.

IT improvement failed

While Bithumb officially confirmed the breach early Wednesday morning local time, it appears that security issues were already drawing attention from the exchange at least several days ago.

According to a follow-up report from CoinDesk Korea, Bithumb conducted a security enhancement checkup on June 16, just days before the confirmed hack.

The exchange explained at the time:

“Recently, the number of unauthorized access attempts has increased. As such, an urgent server checkup was conducted to strengthen the security of all system.”

At the same time, Bithumb also started moving users’ assets to a cold wallet to store cryptocurrencies in a more secure offline environment.

The CoinDesk Korea report indicated that the hack comes at a time when Bithumb is spending 10 billion won, or around $9 million dollars annually on security measures. Another report from Yonhap further suggests that Bithumb beefed up its security measures by implementing so-called “5.5.7 regulations” last month.

Under this requirement, at least 5 percent of a financial institution’s staff should be IT specialists. Among those, 5 percent should focus on information security, while at least 7 percent of the firm’s total budget should be on information security.

The report from Yonhap stated that 21 percent of Bithumb’s employees are technology specialists as of May, and 10 percent of those are responsible for information security. Further, about eight percent of the annual spending budget is used for data protection activities.

Although Bithumb appears to have fulfilled the 5.5.7 requirements, the report said the fact that it has 300 employees means it may not be able to cope with the increasing amount of trading volume and user numbers on its platform.

Government weighs in

An hour before Bithumb confirmed the hack on its website and official Twitter account, the exchange reported the case to the Korea Internet & Security Agency (KISA), a government organization that supervises internet and cybersecurity issues in the country.

An official from KISA said a dedicated analysis team is currently in the process of investigation the hack. As of press time, the agency has not yet disclosed any details from its investigation so far.

Bithumb to refund users

Immediately after announcing the hack, Bithumb confirmed it will pay back victims using its own reserves.

Industry experts later weighed in, including bitcoin pioneer Charlie Shrem, who praised the move despite the unwelcome incident.

“Bithumb hacked for $30 million but covering all losses. Out industry is getting better and stronger,” he tweeted.

In addition, litecoin creator Charlie Lee also commented that he believes the smart move is to “keep on exchange coins that you are actively trading. It’s best to withdraw right after trading.” […]

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