Hack of South Korean Crypto Exchange Coinrail Hits Crypto Prices

Seoul, the capital of South Korea. As Seoul goes, so goes the nation when it comes to elections. With one in two South Koreans living in the country's capital.
Seoul, the capital of South Korea. The hack of cryptocurrency exchange Coinrail comes at the worst possible time as the South Korean National Assembly asks the government to lift the ban on initial coin offerings.

Seoul, SOUTH KOREA – Cryptocurrency prices took a hammering going into Sunday on the back of news of a massive hack at South Korean cryptocurrency exchange Coinrail. Just days after the South Korean authorities gave South Korean cryptocurrency exchange Bithumb a clean bill of health, on Sunday afternoon, Korean Standard Time, Coinrail reported a successful hack which cleared out 2.6 billion NPXS tokens as well as a slew of other ERC20, Ethereum-based tokens. The total value of the hack of NPXS tokens, which enable Pundi X’s cryptocurrency payment system, is approximated to be worth about US$20 million. Pundi X, an Indonesian startup which disseminates point of sales (POS) devices that are designed to make cryptocurrencies more accessible to the masses has halted all transactions using its native NPXS tokens until the Coinrail’s investigation into the hack is complete. The hack of Pundi X’s tokens in particular complicates matters because Pundi X tokens were meant to be an enabling cryptocurrency for retail transactions. According to a source close to Pundi X, who spoke on condition of anonymity, citing pending investigations,

“It’s almost as if someone stole US$20 million in cash.”

In theory, whoever stole the Pundi X tokens would still be able to use the tokens on the Pundi X platform if Pundi X does not do a hard fork – a method by which all of the stolen Pundi X tokens are no longer recognized in the transaction ledger. Although Pundi X was in no way to blame for the hack, it will certainly affect their Indonesia POS roll out plan.

A panel discussion by speakers from Pundi X, a cryptocurrency enabled point of sale device discussing their ICO token sale at a meetup in Mumbai.
A panel discussion by speakers from Pundi X, a cryptocurrency enabled point of sale device discussing their ICO token sale at a meetup in Mumbai.

In response to the hack, the barely eight-month old Coinrail has frozen Pundi X (NPXS) and Artex Coin (ATX) token transactions. In the meantime, as of 9.30 p.m. Eastern Time, Pundi X has made its website inaccessible and expect the investigation into the hack to take another 26 hours.

Although details of the hack have not been released by Coinrail, an independent observer has noted that the 2.6 billion NPXS tokens were diverted to a “hot wallet” (one that is connected to the internet) on IDEX, a decentralized cryptocurrency exchange and other tokens that appear to have been stolen as well include NPER, ATX, DENT, TRX, B2B, JNT, KNC and STORM, but the Pundi X tokens make up the vast majority of the tokens stolen. While it is still too early to know the motive for the hack, the fact that the vast majority of tokens stolen belonged to Pundi X which have the most liquidity and also the most likely to have conversion value through its impending cryptocurrency POS to be rolled out across Indonesia, strongly suggests that hack was for financial reasons.

Pundi X also has its own QR code payment system called Pundi Pundi.
Pundi X also has its own QR code payment system called Pundi Pundi.

Pundi X announced on Twitter that they would be halting NPXS transactions until 6 p.m. Eastern Time, but as of 9.30 p.m. Eastern Time, the halt continues to be in force as Pundi X has been informed by South Korean law enforcement officials as well as South Korean police to extend the suspension to assist with the investigation of the hack of Coinrail.

The prices of all major cryptocurrencies reacted badly to the news, with Bitcoin falling below the all-important psychological support level of US$7,500 and Ethereum being hammered to well below US$600, it’s previous support. With South Korea representing one of the world’s most active markets for cryptocurrencies, traders took their cue from the news of the hack emanating from Seoul and exited from their cryptocurrency positions. The South Korean won is the world’s third most traded currency for Bitcoin and traders were jittery that the most recent hack may be a portend of things to come. According to one Bitcoin trader Kim Dae Su,

“The markets were already on a fragile recovery and it just needs some bad news to knock things over, back into a bearish market.”

Bitcoin and Ethereum are now at their lowest levels in over a week, as traders grow increasingly concerned over what the Coinrail hack will reveal.