Hacked South Korean Bitcoin Exchange Yapizon Offers IOUs

This past week a South Korean bitcoin exchange called Yapizon was hacked for 3816 BTC or roughly $5.3 million USD worth of bitcoins on Saturday, April 22. The exchange has made a statement concerning the hack and plans to offer an IOU token to its customer base to cover losses.

Also read: Bitcoin’s Price Moon Bound Breaking $1400 and Climbing

3816 BTC Stolen From the Korean Bitcoin Exchange Yapizon

According to the bitcoin exchange Yapizon, four of the company’s hot wallets were compromised on April 22, between 2:00 to 3:00 in the morning. Yapizon says roughly 36 percent of funds were stolen and they have filed a complaint with the Cyber Investigation Division of Seoul, the local police. After the hack, Yapizon says they have spoken with their legal team and have decided to split the loss among its customer base.   

“After many discussions, legal and accounting consultations and reviews, we have come to the conclusion that it should be applied fairly to all members,” explains the Yapizon exchange. “It is also the most common way to go through the liquidation process.”

The trading platform details that they are not spreading losses to KRW accounts but only virtual holdings including BTC, ETH, and LTC. Yapizon says executives and the CEO have relinquished property rights to resolve the case and will be paying its members with a token called “Fei.” Furthermore, the Korean exchange says they will also provide customers the opportunity to trade the Fei into shares of Yapizon’s “Yahoo Japan” stock.  

A Bitfinex Precedent?

After hearing the news, many bitcoin proponents were dismayed to hear the exchange was using the same IOU method Bitfinex used this past summer. According to Bitfinex, the company has reimbursed all of the losses from the breach in August. However, many bitcoiners commenting on the Yapizon issue say that Bitfinex has created a dangerous standard for hacked exchanges. Even the Korean exchange details that Bitfinex had set a precedent for their decision.   

“There is a precedent,” details Yapizon’s theft announcement. “The largest Bitcoin trading company in the world, known as Bitfinex in Hong Kong, was hacked in August 2016 and suffered a loss of 120,000 bitcoins (about 22 billion won), and its assets were down by about 36%.

After temporarily issuing coupons equivalent to the amount of the damage to members, it has become a bigger company now, and it has removed the loss by repurchasing the coupon from its members every month.

 ‘Fei’ Distribution Process Time Frame Not Disclosed

The exchange is a relatively small trading platform amongst larger exchanges in the South Korean region like Bithumb, Korbit, and Coinone. Yapizon doesn’t detail any more information about the incident, and the exchange does not seem to be operational. The Korean company does give details on the Fei distribution process but does not disclose when that will happen.

“We are sorry to have caused an economic loss to you,” Yapizon adds. “We will do our utmost to maximize profits for our members by minimizing the loss and increasing the price of ‘Fei’ through the growth of our company and growing our shareholder value.”

What do you think about the Yapizon exchange hack? Let us know in the comments below. 

Images via Shutterstock, Yapizon, and Pixabay.

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  • Mohamoud Hassan

    bad news but we keep moving . its a drop in the ocean

  • These Exchanges need to be more careful when holding public plus private keys for their customers. The internet is not as secure as the encryption of crypto blockchains. I have a third party wallet with “Blockchain Lux”, taking a risk just mentioning where the honeypot is, and they do not auto sweep. Access to their site can include de-authorization of the browser, 2 factor google, and two password. All that really means nothing in the weak encrypted internet. A plus with them is the action of the wallet. they only sweep when you want. And they can sweep from cold or paper wallets. If you have a third party wallet that “needs” to sweep amounts and it has an internet presence, you will be exposed to situations like this Exchange has experienced, bye, bye, funds. Your third party site should never hold your private nor your private password, there is no need and defuses the existence of the private password option. Authorizing your trades after you confirm in an automated way requires this action, I understand, but they should be running through a wash of new address wallets, as you would when running your own private full-node wallet behind a Tor. Hacks from the inside can still occur. And, lay in wait port attempts will still occur. Exchanges need a hardware solution and should invest in it now. The hacker is succeeding and the value plus risk is warranted. And Tor is hack-able, Blockchains need a anonymous ubiquitous trading network of their own. A clean, fast verifiable secure connection-less one way transaction network where both sides only see the blockchain and not each other. Hardware ideas are coming, TailsOS and KaliOS are very close, but do not include the blockchain as security. Somehow the exchanges need to hold a better representation of security or they will bring the Bitcoin preciousness down. Stop losing other peoples’ Trust and Money!!!! Customers need more than just a refund, they need restitution of your ills, a cut of the bounty when you find the hackers responsible, and your effort in a hard solution to an ever growing problem.

  • radact

    I like the way the just “oh sorry for losing all your money”…. at least a bank would be accountable.
    When will people learn not to keep their coins on exchanges?