Coincheck Hackers Attempt Large-Scale Crypto Money Laundering

Hackers behind the $530 million Coincheck cryptocurrency heist are attempting to distribute the stolen XEM coins across six exchanges. NEM Foundation has detected the movement and is collaborating with the exchanges to prevent the illicit sale of the stolen funds. Cryptocurrency security firms warn that hackers often transfer stolen assets among different cryptocurrencies to evade detection.

Coincheck Hackers Attempt Large-Scale Laundering of Stolen Cryptocurrency

London, United Kingdom - Hackers responsible for the brazen theft of approximately $530 million worth of cryptocurrency from the Coincheck exchange last week have initiated a large-scale laundering operation, attempting to move the stolen assets into various exchanges for conversion and sale.

NEM Foundation, the organization behind the XEM cryptocurrency, which constituted the bulk of the stolen funds, has identified an unidentified account to which the stolen coins have been transferred. The foundation's representatives disclosed that the account owner has commenced efforts to distribute the coins across six exchanges, presumably for subsequent sale.

The location of the hackers' account remains unknown, hindering law enforcement efforts to track and seize the stolen assets. However, NEM Foundation and external security experts are closely monitoring the situation and engaging with the identified exchanges to prevent the illicit movement of funds.

"The hackers are attempting to dissipate the stolen funds across multiple exchanges, and we are proactively contacting those entities to thwart their efforts," stated Jeff McDonald, a representative of the NEM Foundation.

Hackers have reportedly begun sending out the stolen XEM coins in smaller batches of 100 XEM, equivalent to approximately $83 each, to obscure their trail and evade detection. This fragmentation of stolen funds into smaller transactions is a common tactic employed by cybercriminals to avoid triggering anti-money laundering mechanisms.

"Laundering operations often involve splitting large sums into smaller transactions, as this strategy reduces the likelihood of being flagged by exchange protocols designed to detect suspicious activity," explained Tom Robinson, co-founder of Elliptic, a London-based cryptocurrency security firm.

The stolen coins represent approximately 5% of the total supply of XEM, which ranks as the tenth-largest cryptocurrency globally according to Coinmarketcap. McDonald expressed skepticism about the hackers' ability to liquidate the entire cache at once, given the potential market volatility that such a massive influx of sell orders could trigger.

"It is unlikely that the hackers will attempt to move all of the stolen cryptocurrency simultaneously, as the market would be unable to absorb such a volume," he explained.

Instead, experts anticipate that the hackers will seek to launder the funds through a series of conversions into other cryptocurrencies before transferring them back into conventional currencies. This convoluted process would further anonymize the stolen assets and make them more challenging to trace.

"Regrettably, we do not expect full recovery of the stolen funds," conceded McDonald. "However, we remain hopeful that substantial efforts can be made to mitigate the impact of this heist."

The Coincheck hack highlights the persistent risks associated with cryptocurrency exchanges, which have become frequent targets for cybercriminals. Since 2011, at least 36 successful exchange heists have been documented, leading to the loss of over 980,000 bitcoins and rendering numerous exchanges defunct.

In 2014, Mt. Gox, once the world's leading bitcoin exchange, collapsed after losing bitcoins worth around half a billion dollars - a record-breaking heist at the time that sent shockwaves through the cryptocurrency community.

"The Coincheck hack demonstrates the evolving sophistication of cybercriminals targeting cryptocurrency exchanges," said Robinson of Elliptic. "While the industry has made significant strides in security, these incidents serve as reminders of the ongoing challenges."

As of the time of writing, XEM was trading at approximately $0.83 per coin, with a total market capitalization of around $7.5 billion. While the price has declined by approximately 20% since the hack became public, XEM remains significantly higher in value than two months ago.

In response to the incident, the Japanese Financial Services Agency (FSA) has ordered Coincheck to undertake immediate operational improvements, and the exchange has suspended trading in all cryptocurrencies except bitcoin.