Cryptocurrency Scams or Hacks are on the rise and exchanges are on the edge. Last week, Maple Exchange (which is offline at press time) fell prey to “hackers” who made way with around $900 BTC. That’s virtually all of the exchange’s fund. At current BTC/USD spot prices, that’s a staggering $5.9 million in losses. What’s even worse is that the exchange has made it clear that as long as the investigation is in progress, it can’t manage to refund all the customer’s fund. Read more here about the cryptocurrency scams and the importance of KYC AML policy.
Hack or Exit Scam
But, skeptics are not buying the “hack” story pointing out a suspicious sequence of events leading to Sunday’s breach. A few hours after the hacking story broke, crypto detectives were scrambled and within minutes it was realized that the exchanges operatives had attempted to wipe out the owner’s internet presence.
Our maintenance is officially over and we have finished upgrading our server! Version 2.0.0 is now online and available for everyone. Enjoy our new sleek look, stay tuned for future updates as we're not yet done! Check Discord/Telegram for a verbose list of updates.
— MapleChange (@MapleChangeEx) October 27, 2018
This comes days after the exchange had handled $64,000 worth of BTC trading volumes and had upgraded their servers. As a matter of fact, the spike in trading activity was the highest in six months. A few days later, the hack happened.
Due to a bug, some people have managed to withdraw all the funds from our exchange. We are in the process of a thorough investigation for this. We are extremely sorry that it has to come to end like this. Until the investigation is over, we cannot refund anything.
— MapleChange (@MapleChangeEx) October 28, 2018
Even though the loss is a blow to honest customers who drew value from the exchange, the failure of due diligence and Maple Exchange recklessness of failing to secure cold storage services as most highly liquid and trusted exchanges raised more questions than answers. Add this to the fact that the exchange took out their social media and site moments after the loss only to revive it once customers pinpoint the exchange’s IP address mean this was an attempted theft which could end up being punished and funds reimbursed.
— maplechang'ed (@Maplechanged) October 28, 2018
Kucoin and Oyster Protocol Drama
Now, the question everyone is asking is if these exchanges should be under government regulators for the sake of customers. Though everyone has their own preference, implementation of KYC AML policy could hamper rough elements from going AWOL and sucking dry the exchange’s coffers.
— Oyster Protocol (@OysterProtocol) October 31, 2018
Already the implementation of KYC at Kucoin prevented the anonymous founder of Oyster Protocol from damaging the PRL token. Before Kucoin’s implementation of KYC AML policy, Bruno Blocks exploited a smart contract vulnerability, transferring directorship to himself and cracking open the coffers of Oyster initial ICO. Thereafter he transferred $330,000 worth of PRL tokens, converting them to BTC and ETH at Kucoin. That was days before Nov 2 deadline.
2/2 Earlier this morning directorship was transferred by the original Ethereum addressed controlled by Bruno Block, allowing the new director to mint 3 mil new PRL. We do not know any reason why this would be done and are currently looking into solutions.
— Oyster Protocol (@OysterProtocol) October 29, 2018
By all counts, it could have been worse. Kucoin is not the only case, Changelly-a popular alternative for ShapeShift, require no registration. Despite that, their collaboration with BitHumb, a South Korean exchange which suffered a $30 million hack, lead to the recovery of $485,000 worth of XRP just from asking suspicious accounts flagged by BitHumb to submit KYC AML policy requirements.
Hong Kong crypto exchange helps Bithumb recover lost funds following June hackhttps://t.co/xbaUorVHwW
— Cointelegraph (@Cointelegraph) October 30, 2018
KYC AML Policy is Necessary
Thing is the ecosystem is only nascent, it’s maturing and before it has its own wheels to the role, KYC and similar anti money laundering policies are perfect check and balance. It mostly applies to exchanges that allow crypto to fiat and vice versa. That’s why it is essential for exchanges who want to conduct their due diligence. KYC is this security blanket that protects the exchange in case of a breach and allows fast recompense for victims.