DMM Bitcoin Winds Down After $320M Hack: What About User Funds?

DMM Bitcoin Winds Down Operations After $320M Hack: Details & Impact

Japanese cryptocurrency exchange DMM Bitcoin, part of the DMM.com group, announced its decision to wind down operations after suffering a massive $320 million loss in Bitcoin due to a hack in May. This significant security breach has led the company to abandon plans to restructure and seek alternative solutions for its customers.

Source: X

Major Crypto Hack and Immediate Aftermath

In a statement released on December 2, DMM Bitcoin confirmed that it detected the breach on May 31, involving the compromise of a private key linked to a wallet containing over 4,500 Bitcoin. This event marks one of the largest crypto hacks in Japan’s history, second only to the $530 million Coincheck hack in 2018.

DMM Bitcoin secured the amount of Bitcoin equivalent to what was lost with financial support from the DMM group. However, the Financial Services Agency issued a business improvement order to the company in September under the payment service law, urging it to identify the cause of the breach and strengthen its systems. The agency cited issues such as the concentration of authorities for system operation and security and the lack of decentralized management of private keys for asset management.

Transfer of Assets to SBI VC Trade

According to a Nikkei Asia report, DMM Bitcoin plans to transfer all customer accounts and assets to SBI VC Trade, a cryptocurrency exchange operated by the financial giant SBI Group. This transfer is expected to take place by March 2025. The company assured that customer assets, including Japanese yen and cryptocurrencies, would be safeguarded during the transition.

The breach forced DMM Bitcoin to halt efforts to restructure and seek alternative solutions for its customers. In July, blockchain analyst ZachXBT suggested that the Lazarus Group, a North Korean-linked cybercrime organization, was likely behind the hack, noting similarities in laundering techniques and off-chain activity.

The DMM Bitcoin hack is part of a broader trend of increasing attacks on centralized exchanges in 2024. Other major incidents this year include the $235 million breach of India’s WazirX exchange in July, a $52 million hack on Singapore’s BingX in September, and a $55 million exploit of Turkey’s BtcTurk in June.