Regulators Probe Coincheck's Hack Compensation Claims

Following its notable $530 million hack, Japan's financial watchdog is reportedly probing into crypto exchange Coincheck's finances through an on-site inspection.

According to a report from Nikkei, inspectors from the Financial Services Agency (FSA) arrived in Coincheck's office this morning to examine whether the firm has the financial capability to fulfill its promise that it would compensate users who lost funds in the major breach.

As reported by CoinDesk, Coincheck, one of the biggest cryptocurrency exchanges in Japan, saw 500 million NEM token stolen on Jan. 26, resulting in a loss of $533 million at the time from around 260,000 users.

Following the hack, Coincheck announced on Jan. 27 that it would issue compensation at a rate of $0.81 for each stolen token, which would amount to a total payout of $420 million.

The FSA then stepped in on Jan. 29 and gave an administrative order to Coincheck, requiring the exchange to report by Feb. 13 on its investigation on causes of the hack, as well as its plans for security improvements.

Yet, whether Coincheck is in a position to fulfill its compensation promise has raised questions from FSA. The on-site inspection reported today comes as the first instance in which regulators in Japan have taken oversight over cryptocurrency exchanges to a physical level for investor protection.

As of press time, the agency has yet to release a formal statement regarding the result of its inspection.

Yet, according to another report by Reuters, the FSA said on Friday that it has already ordered Coincheck to fix its security loophole, which was also one reason FSA has yet to approve Coincheck as an exchange.

Financial Services Agency image via Shutterstock.