Authorities in Japan warned Coincheck about security flaws before $530m cryptocurrency theft

Coincheck was aware of security flaws before $530m cyber heist

Japanese financial authorities warned cryptocurrency exchange service Coincheck to fix a number of flaws - before cyber criminals stole $530 million last week in the world's biggest-ever cyber heist.

According to Reuters, Japan's financial regulator warned Coincheck about a string of serious security flaws and told it to fix them before hackers could compromise its systems.

The Financial Services Agency explained that it did not award the company with an official approval to operate because it had identified serious security problems after conducting a review of its systems.

However, the regulatory body did give the company a temporary operating licence. After the attack took place, ten FSA officials completed a spot-check on the company's security to look for evidence as part of their investigation.

The company has promised to compensate customers left out of pocket as a result of the attack.

Last week, hackers managed to compromise the company's systems and steal hundreds of millions of dollars worth of the NEM digital money. Coincheck explained that the cash wasn't kept in a secure 'cold wallet' as it should have been.

In 2014, a similar incident occurred when cyber crooks attacked the Mt. Gox bitcoin exchange and got away with $470 million. The attack led to calls for governments to do more to regulate cryptocurrencies.

Last year, Japan implemented regulations on exchanges across the country. China and South Korea have also implemented strict laws on cryptocurrencies.

After the attack, the FSA slammed Coincheck with a "business improvement" order. It is currently drawing up plans to investigate other Japanese cryptocurrency exchanges. They are expected to conduct a system risk assessment, among other measures.

On Sunday, Coincheck told stakeholders that it would offer $425 million in compensation. However, it's open to question whether the company actually has this amount in either real cash or digital cash available.