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An electric board shows exchange rates between the South Korean won and bitcoin at a cryptocurrency exchange in Seoul.   © Reuters
Cryptocurrency

Hack casts North Korea's shadow over crypto exchanges

Youbit heist in South Korea spotlights security vulnerability

SEOUL -- The hacking and collapse of a South Korean cryptocurrency exchange this week has heightened suspicions that the North is targeting the virtual coins as a source of foreign currency, raising concerns over the security vulnerability of such exchanges.

Yapian, the operating company behind the exchange Youbit, posted an apology Tuesday informing users it was filing for bankruptcy protection. Around 4:35 a.m. that day, Yapian said, hackers broke into a Youbit "hot wallet" -- cryptocurrency storage kept constantly online and ready for exchange. The exchange lost about 17% of its assets.

Trading, deposits and withdrawals were halted at 2 p.m. Tuesday. Yapian said it will pay users about 75% of their balance held at the time of the hack. The rest probably will be returned to users after bankruptcy procedures are complete.

South Korean police are investigating, and the Korea Internet & Security Agency has launched its own probe. Pyongyang's involvement, though widely suspected, remains unconfirmed.

The North faces heavy economic sanctions from the international community as a result of its ongoing nuclear and weapons development. Securing foreign currency is vital to fueling those programs.

Youbit, then known as Yapizon, also was a victim in a series of cyberattacks on South Korean crypto exchanges this spring. The South's National Intelligence Service surmises that North Korea was behind the hacks.

On Wednesday, following news of Youbit's collapse, the South Korean government ordered four of the country's 10 cryptocurrency exchanges to improve their information management.

"Most of the exchanges had weak security, only by varying degrees," said a government source involved with an inspection of all 10 markets in October and November.

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