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While the NEM snatched from Japan's Coincheck has been tracked to various accounts, not all such wallets can be linked to users. (Photo by Rie Ishii)
Cryptocurrency

Cryptocurrency group gives up search for Coincheck loot

Most NEM taken from Japanese exchange operator apparenty laundered

TOKYO -- The roughly 58 billion yen ($545 million) in virtual currency stolen from a Japanese exchange operator in January is no longer being traced, the organization behind the pursuit said Tuesday.

The NEM Foundation, which promotes the cryptocurrency of that name, said it had disabled as of Sunday the digital "mosaic" tracking tags it applied to the NEM taken in the Jan. 26 hacking attack on Coincheck. With most of the stolen funds apparently laundered into bitcoin and other virtual currencies, the group likely judged further monitoring would be fruitless.

The foundation said it had "provided law enforcement with actionable information," however. It declined to give a clear reason for the halt.

The group had urged exchanges around the globe to decline transactions with the stolen NEM, should it surface. But the thief or thieves dodged oversight by trading the currency on the dark web, a section of the internet that requires special software to access and offers relative anonymity. Someone also devised methods to remove the tracking mosaics.

More than 60% of the stolen NEM has been exchanged for other cryptocurrencies, said Takayuki Sugiura of L Plus, a Tokyo company that deals in information security. That would amount to about 35 billion yen.

Identifying an account holding stolen NEM is not enough to reclaim the currency, as wallets often cannot be linked to users. Exchanges across numerous countries let users set up accounts without proof of identity.

Moreover, NEM taken from Coincheck has already been transferred to a range of accounts not connected to the theft. Some users were mistakenly identified as culprits because they had mosaic-tagged NEM in their wallets, according to Jonathan Underwood, head of Tokyo's Blockchain Daigakko institute.

A team of around 100 from Tokyo's Metropolitan Police Department has been investigating the heist. Someone appears to have hacked into Coincheck's internal systems and gained access to a digital "key" used to transfer the NEM, but where the hack originated from has yet to be determined.

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