Japanese financial authorities have revealed that they told Tokyo-based cryptocurrency exchange service Coincheck to fix a number of security flaws before crooks stole $530 million last week.
Japan's financial regulator warned Coincheck about a string of serious security flaws and told it to fix them before hackers could compromise its systems.
The Financial Services Agency (FSA) explained that it did not award the company with an official approval to operate because it had identified serious security problems after conducting a review of its systems, according to Reuters.
However, the regulatory body did give the company a temporary operating licence. After the attack took place, ten FSA officials completed a surprise security check on the firm to look for evidence and better understand the attack.
At 8am on Friday, they launched the investigation into the company with the aim of claiming compensation on behalf of customers and other stakeholders.
Last week, hackers managed to compromise the company's vulnerable systems and steal hundreds of millions of dollars worth of digital money. Coincheck explained that the cash wasn't kept in a secure ‘cold wallet".
In 2014, a similar incident occurred when cyber crooks attacked the Mt. Gox Exchange and got away with around $470 million worth of Bitcoin. The attack led to calls for governments to do more to regulate cryptocurrencies.
Last year, Japan implemented regulations on exchanges across the country. China and South Korea have also implemented strict laws on cryptocurrencies.
After the attack, the FSA slammed Coincheck with a "business improvement" order, and it is currently drawing up plans to investigate other Japanese cryptocurrency exchanges. They are expected to conduct a system risk assessment.
On Sunday, Coincheck told stakeholders that it would offer $425 million in compensation. However, the FSA will need to conduct another investigation to see if the company actually has this amount of cash - digital or otherwise - available to make good on this promise.
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