For a variety of reasons, South Korea has rapidly become a center of attention in the cryptocurrency ecosystem. That dynamic was on full display today, December 19th, as the markets reacted to the S. Korean Youbit exchange’s bankruptcy filing on the heels of a new catastrophic hack.
For Korean investors, the episode is nothing short of a “here we go again” moment, as Youbit had already suffered a devastating bitcoin hack back in April 2017.
In light of that initial assault, the exchange stressed their mission to improve “security, recruitment and system maintenance,” but apparently their efforts weren’t enough to halt the most recent cyber-offensive.
Tangible details on the incident are scarce right now, but the Youbit team has already released a statement informing traders of the exchange’s impending bankruptcy and, worse yet, that only 75 percent of traders’ on-exchange balances would be available for withdrawal for now:
“At 4:35 am, we lost our coin purse due to hacking.
1. The coin loss at 4:35 am is about 17% of total assets.
All other assets were kept in the cold wallet and there were no additional losses.
2. Loss ratio is low compared to this past April’s hack, but
the management of Yaffian Co. , Ltd. is going to proceed with the procedure of stopping transactions, deposits, withdrawals, and filing for bankruptcy on December 19th.
3. Accordingly, all coin and cash withdrawals will be suspended at 12:00 pm local time on December 19th, 2017.
4. Due to bankruptcy, the settlement of cash and coins will be carried out in accordance with all relevant bankruptcy procedures.
5. However, in order to minimize the damage to our members,
we will arrange for the withdrawal of approximately 75% of their balances on December 19. The rest of the unpaid portion will be paid after the final settlement is completed.
6. We will do our best to minimize the 17 percent loss’s effect on our members, through various methods such as cyber-comprehensive insurance (~$3 billion) and selling the operating rights of the company.”
There’s a few points to consider here.
First off, while it’s still extraordinarily inconvenient that traders can only access 75 percent of their on-exchange holdings for now, one can’t help but be impressed by the Youbit team’s response compared to the major exchange hacks of the past, e.g. MtGox.
During the MtGox crash, the situation was complete chaos and users are still trying to recoup something, anything, from their original investments.
On the other hand, Youbit is showing what it takes to “face the music,” as they’ve already allowed traders the opportunity to recoup the majority of their balances and have already provided a clear blueprint for how the exchange plans to make good on the remaining losses.
In the very least, the proactive, quick, and honest response is heartening. Even still, though, traders are going to want answers. And many will want much more than that.
All signs point to North Korea
Moving into the speculative, it would be astonishing to discover that North Korea wasn’t behind this latest hack.
While it might seem to be taking a leap in the absence of hard evidence, there can be no question that North Korean government-sanctioned hackers are suspects numero uno in the second Youbit hack for now.
That’s because a developing story line that’s been reported on at length in 2017 has been the increasing frequency of North Korean cyber-attacks against South Korean crypto exchanges.
This new Youbit attack, then, just seems like the latest salvo in this cyber war. And, with North Korea being outed today by the U.S. and U.K. as being the culprits behind the devastating WannaCry Bitcoin-ransom attack, it’s clear that Kim Jong Un is directing a significant amount of focus on novel attack vectors using or involving cryptocurrencies.
The motivations seem obvious.
In waging a hybrid, asymmetric cyber war against South Korea, any degree of domestic discord that North Korea can sow in their southern neighbors’ economy would be viewed as a win.
Moreover, these attacks give North Korea’s hackers experience in the cryptocurrency space as a whole, allowing Kim Jong Un to potentially accrue cryptocurrencies outside the purview of international sanctions.
We’ll have to wait and see what conclusion we can draw as more details about the Youbit hack are disclosed in the coming days.
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