Japanese Exchange DMM Bitcoin to Cease Operations After $320 Million Hack

Japan’s cryptocurrency exchange DMM Bitcoin is set to liquidate its assets and wind down operations following a May exploit that resulted in over $320 million drained, according to a Dec. 2 notice from the exchange.

The exchange plans to transfer customer assets to SBI VC Trade, a subsidiary of SBI Holdings, by March 2025.

“DMM Bitcoin Co., Ltd. is pleased to announce that we have agreed to transfer customer accounts and custody assets to SBI VC Trade Co., Ltd. on November 29, 2024,” the exchange said.

Liquidation

As part of its liquidation plan, DMM Bitcoin will move customer accounts and assets to SBI VC Trade by March 2025, the report says. After the transfer is complete, DMM Bitcoin plans to discontinue its business.

Users who have any open leveraged positions may consider closing them before the transfer date as these transactions will not be transferred and will be settled prior to the transfer date.

DMM Bitcoin and SBI VC Trade are still working out the specific details of the transfer process. The exchange says it will provide more details once it finalizes the plan and other important details.

DMM Bitcoin suffered a major security breach on May 30 this year, when hackers infiltrated the exchange’s system and stole the private key to a wallet containing over 4,500 Bitcoin. The exchange has temporarily halted various operations, including new account reviews and spot trading buy orders, to mitigate additional risks.

In the statements following the incident, DMM Bitcoin said it was committed to fully reimbursing affected customers using resources from its parent company, the DMM Group, a Japanese e-commerce conglomerate which operates over 40 different services across various sectors.

Huge Losses

In June, DMM Bitcoin announced plans to raise $320 million to reimburse affected users. The exchange secured a 5 billion yen loan and planned to raise an additional 50 billion yen through a capital increase and subordinated debt.

However, it looks like the exchange is facing challenges in recovering the stolen funds, which clearly affects its ability to deliver on its assurances.

The May hack is one of the largest illicit crypto outflows in Japan’s history, second only to the Coincheck exploit in 2018, which saw a loss of 58 billion yen. The investigation into the unauthorized leakage of DMM’s crypto assets is still ongoing.

Experts suspect the Lazarus Group, a notorious North Korean hacking collective, may be behind the DMM Bitcoin attack due to similar methods used to launder the stolen funds. The group has been known to exploit zero-day vulnerabilities in software to gain unauthorized access to systems.

According to blockchain sleuth ZachXBT, Lazarus Group started laundering over $35 million stolen from DMM through Huione Guarantee in Cambodia. The marketplace reportedly processed $11 billion in transactions from various crypto exploits.

Lazarus Group is reported to conduct multiple high-profile cyberattacks on financial institutions and cryptocurrency exchanges, leading to substantial financial losses. Among those, the hack targeting Axie Infinity’s Ronin bridge is one of the largest in cryptocurrency history.

DMM Crypto Shuts Down Seamoon Protocol

In August, DMM Group and its subsidiary DMM Crypto announced they joined forces with blockchain developer Progmat to launch a stablecoin.

According to multiple sources, the partnership aims to conduct a joint study on the issuance of a new stablecoin compliant with Japanese regulations. This stablecoin is intended to be integrated into DMM’s Seamoon Protocol, which focuses on enhancing the digital economy related to Japanese culture and entertainment.

The stablecoin would serve as a reserve currency for the Seamoon Protocol’s treasury pool and help stabilize the value of its native token, SMP.

However, in November, DMM Crypto closed its Seamoon Protocol due to “changes in the business environment.” The closure has left the future of its stablecoin project uncertain.