DMM Bitcoin to Shut Down After Losing $320 Million in May Hack

Highlights:

• DMM Bitcoin is shutting down after losing $320 million in a May hack affecting over 4500 BTC.
• Customer assets will be transferred to SBI VC Trade in March next year following the company’s shutdown.
• Japan is tightening crypto regulations to protect assets and prevent outflows after recent exchange failures.

DMM Bitcoin, a prominent crypto exchange in Japan, is preparing to close its doors after a major hack. In May, the exchange lost $320 million worth of Bitcoin, one of the biggest crypto hacks in Japan. The breach has been too difficult for the company to recover from. The loss has forced DMM Bitcoin to cease operations and seek alternatives for its users.

JAPANESE GIANT TAPS OUT AFTER $300M BITCOIN BREACH

DMM Bitcoin is folding after losing 4,502.9 BTC (over $300M) in a May hack.

SBI VC Trade is scooping up their assets, with the handover set to wrap by March 2025.

Despite raising ¥55B ($365M) mid-year to stay afloat, DMM… pic.twitter.com/8zswP42QWQ

— Mario Nawfal’s Roundtable (@RoundtableSpace) December 2, 2024

DMM Bitcoin’s $320M March Hack

The hack occurred on May 30, when attackers compromised DMM Bitcoin’s servers. The hackers hacked into one wallet, stealing more than 4,500 Bitcoins. At that time, DMM Bitcoin assured customers that all deposits would be fully guaranteed. 

Following the breach, the company halted the withdrawals and new account registrations. DMM Bitcoin also promised to secure replacement funds through its affiliated companies. Despite these efforts, the stolen Bitcoin could not be recovered. DMM Exchange, launched in January 2018, is operated by the Japanese e-commerce giant DMM Group.

DMM’s loss is the second-biggest in the region after the $530 million Coincheck hack in 2018. In July, blockchain investigator ZachXBT reported that $35 million of the stolen crypto was laundered. The funds were funneled to Huione Guarantee, a marketplace notorious for crypto scams.

1/4 So far in July 2024 more than $35M from the $305M DMM Bitcoin hack has been laundered to the online marketplace Huione Guarantee

It is suspected that Lazarus Group is behind the hack due to similarities in laundering techniques and off chain indicators. pic.twitter.com/g1ndlttBll

— ZachXBT (@zachxbt) July 14, 2024

DMM Bitcoin will Transfer Customer Funds to SBI VC Trade

A statement released on Dec. 2 indicates that DMM Bitcoin will transfer customer assets, including Japanese yen and crypto, to SBI VC Trade as part of its closure process. The transfer will take place around March next year, the firm stated.

SBI VC Trade will also manage the transfer of crypto stocks from DMM Bitcoin. The crypto exchange has also confirmed that margin trading and unresolved positions will be stopped on the same transfer date to ensure a smooth transition for users.

Evolving Crypto Regulations

The Financial Services Agency started pushing for stronger regulations in the crypto sector in response to the DMM Bitcoin hack. The agency aims to protect the customer assets. Japan has made some recent changes to corporate tax rules for cryptocurrency companies. 

With these changes, crypto exchanges can now protect assets that are stored inside the jurisdiction of Japan, despite the exchange being foreign. The new mandate seeks to ensure funds outflow is prevented in the case of another exchange failure.

The FSA also aims to regulate all crypto exchanges based in Japan. These regulations previously only applied to exchanges that were registered under the Financial Instruments and Exchange Act. This regulatory shift is due to lessons learned after-past events such as the FTX collapse. Under new rules, customer assets would be more effectively protected, making investments safer for users.