Stolen NEM Fund: Forever Tainted, Not Sold on Exchanges
The stolen NEM coins will be of no benefit to hackers, as the NEM team has used technology to trace them.
The NEM team has announced it is able to trace the coins stolen from the Japanese exchange Coincheck. So far, the funds cannot be sold on the free market.
But the move from the NEM protocol also puts questions on the possibility of centralized control on the platform. While many who lost crypto coins wish there was a way to reverse the unintended transactions or refund the theft, this also points to limitations in the freedom of users. The NEM Foundation announced in a recent press release:
"The decentralized NEM protocol’s flexibility allows transactions to be traced in real-time, which aids exchanges to identify wallets attached to malicious activity. This helps make stolen XEM tokens effectively unusable, because they cannot be deposited without being flagged by NEM."
The 526 million lost coins from hundreds of traders would be refunded at $0.81. NEM currently trades at $0.72, but may have a much greater upside potential, as it has reached levels above $1.
The NEM network would observe for wallets that receive the stolen funds. That way, it can be clear if the coins have been sent to an exchange wallet.
At the moment, there are no completely anonymous exchanges, so in case a hacker wants to exchange funds, an exchange is usually the place that links the anonymous crypto coins with an online identity.
The NEM foundation has declined to perform a hard fork and roll back the transaction.
The attack against the Coincheck hot wallet, which took away the funds, put the exchange under closer scrutiny from Japanese authorities.
Japanese exchanges are fully legal and compliant, and often serve small-scale individual investors - so a protection of personal finance is within the scope of authorities. After the Coincheck case, all other exchanges would go through security testing.
But wallets are a relatively new technology, and no standards exist for their protection, except perhaps for general cyber security.