Korea's Exchange Hacks: What the Country's Crypto Scene Is Saying

The past two weeks have seen two South Korean exchanges get attacked and robbed, sparking commentary and critique among the country's local cryptocurrency community.

It began with the Coinrail hack on June 9. At the time, the popular South Korean cryptocurrency exchange tentatively announced a "cyber intrusion" that saw the loss of $40 million worth of cryptocurrencies.

The exact number and amount of tokens taken from the exchange have yet to be confirmed by the company itself, though a third-party firm assisting Coinrail gave a few estimates in a blog post the following day.

If that wasn't enough, on June 20, Bithumb – South Korea's largest by trade volume – also announced a major security breach in which $31 million was reported to be lost. In a post published on their official website the same day, Bithumb reassured customers that their assets were now securely stored in offline "cold" wallets unreachable to hackers and the stolen funds would be fully reimbursed.

Combine this environment with a recent bearish market trend taking the price of bitcoin down in a way not seen since 2014 and you get the kind of social media uproar that questions just about everything.

As one Korean cryptocurrency skeptic tweeted:

Along the same lines, @marco20bil mocked a past Coinrail advertisement boasting its security by uploading a picture of the ad and tweeting at the company:

"Anyone would look at this and see it as an insider act, no? Please catch the culprit and restore the platform back to the original state as soon as possible…You said there is no vulnerability of being hacking in an advertisement. Are you joking me right now?"

Digging Deep

For most, it's not a matter of tech security – that's a given for those that care – but rather about the people who operate the exchanges behind the scenes.

As @leejongsul78 puts it:

Indeed, much of the community's ire has been pointed toward those operating the exchanges.

One user, @dongjinkim5, addressed Bithumb directly in light of their urgent notice Twitter announcement to users on June 19, pleading:

Another accused Coinrail of withholding information about what actually went down during the hack.

As might be expected, some of the furor devolved into the downright conspiratorial. For example, one user emphasized the possibility Bithumb may be creating a cover-up by claiming it had been robbed through a hack.

No strangers to risk

As far as answers go, the community can only watch and wait as the investigations unfold.

And as it stands, the government of South Korea is doing some of the heavy liftings there: the Korea Internet and Security Agency (KISA) and the Ministry of Science, Information, and Communication Technology are currently in the process of investigating both hacks, but have yet to make any public disclosures on their findings.

But South Koreans are no strangers to the riskiness of crypto markets, as just last year, another notable cryptocurrency exchange, Youbit, was hacked for a reported $73 million worth of bitcoin, and subsequently, filed for bankruptcy last December.

Nor are South Koreans quick to accept these incidents as merely cyber-related heists by criminals out for the money.

As reported by the Wall Street Journal, speculation arose around the possibility of the true culprit behind the Youbit hack being none other than their adversarial counterpart, North Korea. It has been reported from other sources that this is by no means the first time the South Korean National Intelligence Service has suspected North Korea to be behind cryptocurrency hacks as a method to evade financial sanctions.

One of the alleged targets was Bithumb, which reportedly saw $7 million pilfered during a string of attacks last year.

Still, the avid support of cryptocurrencies in South Korea remains strong, and while the fallout of past weeks events is still taking shape, eyes are not only looking to South Korea, but to the world.

As one South Korean cryptocurrency trader, @sunghq2, put it:

"The price impact that the Bithumb hacking will have is determined by the West's reaction to the incident amplifying Asia's reaction, which then impacts Asia's reaction, impacting the West's reaction, and back and forth."

It's just like that (slightly amended) famous saying goes: Back and forth the crypto markets go – where it'll stop, nobody knows.

Editor's Note: Statements in this report have been translated from Korean. Not all statements are fully translated.

Gangnam image via Shutterstock