A major Japanese cryptocurrency exchange, DMM Bitcoin, has officially announced that it will liquidate after being devastated by a May 2024 hack that stole more than 4,500 Bitcoin-worth around $320 million from its accounts through a private key breach.
This hacking incident, therefore, is a tremendous blow to the company, but despite the best efforts to rebound from the hacking, DMM Bitcoin could not restart its business. The firm has now resolved to stop efforts to revive its business and will pass customer assets to SBI VC Trade, which is also a subsidiary of the SBI Group.
Hack Leads to Significant Losses and Shutdown of Operations
On May 30, 2024, an unauthorized leakage of private keys led to a security breach at DMM Bitcoin. It resulted in a loss of more than $320 million worth of Bitcoin from one wallet, hence all the trading activities were stopped for a while along with the new account openings and withdrawals. In response to the breach, DMM Bitcoin assured its customers that deposits would be fully guaranteed and promised to commit the equivalent amount of Bitcoins to compensate users. The firm also claimed it would get these funds through support from its group companies.
Despite these promises, DMM Bitcoin could not recover from the hack’s financial and reputational damage. The breach was in fact Japan’s second-largest cryptocurrency theft, after the hacks that broke $530 million back in 2018 at Coincheck. Months after the DMM Bitcoin hack, blockchain analysts discovered that about $35 million of the stolen Bitcoins had been laundered through Huione Guarantee, an online marketplace notorious for hosting crypto scams. The techniques used to launder the Bitcoins pointed toward the involvement of the North Korean hacking syndicate Lazarus Group.
SBI VC Trade to Handle Asset Transfer and Future Operations
On December 2, 2024, DMM Bitcoin announced it had a basic agreement with SBI VC Trade to transfer all its customer accounts and deposit assets over to the latter. As reported by the companies, the process is expected to be completed by March 2025. Assets, which include Japanese yen and cryptocurrencies, held in DMM Bitcoin will be transferred over to SBI VC Trade. Furthermore, SBI VC Trade will also manage the exchange of the crypto stocks on the exchange.
This deal marks the end of DMM Bitcoin as an independent business entity since the exchange is now set to close the business. SBI VC Trade, affiliated with the SBI Group, will assume responsibility for the customers and their DMM Bitcoin balances.
This transition forms the larger trend of hacking, which has been a headache not only for exchanges but even for companies in the crypto universe in 2024. Others include DMM Bitcoin where other exchanges like WazirX in India, BtcTurk in Turkey as well as BingX in Singapore received significant cyberattacks.
The Changing Landscape of Cryptocurrency Exchanges
DMM Bitcoin liquidation reminds us of the risks and volatility that characterize any business in the cryptocurrency industry. Centralized exchanges, just like DMM Bitcoin, have been under much scrutiny and trouble in 2024, as hackers keep on focusing on vulnerabilities in the exchange infrastructure.
The high speed at which the industry is growing has led to frequent hacking attacks, which raise the need for questioning the security of the customer funds and sustainability of central exchanges.
Besides the hack, DMM Bitcoin had also been struggling through its Web3 gaming business, Seamoon Protocol. Indeed, DMM.com has been working on a stablecoin platform called Progmat for Seamoon’s ecosystem. However, due to “recent rapid changes in the business environment,” DMM Crypto cancelled its Seamoon protocol, indicating further signs of the business struggling to stay competitive and solidify its market share.
As DMM Bitcoin readies to wind down, the liquidation is a lesson to all cryptocurrency exchanges: they must always have good security and be agile in an ever-changing business environment.
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