Japan's DMM Bitcoin Exchange to Liquidate After $320 Million Hack Loss

DMM Bitcoin, a prominent Japanese cryptocurrency exchange, is set to liquidate after a devastating hack in May that resulted in a loss of $320 million in Bitcoin. The company has been unable to recover from the breach and is now winding down operations.

As reported by Nikkei Asia on December 2, DMM Bitcoin is preparing to transfer its customer assets to SBI VC Trade, a crypto exchange under the SBI Group, by March 2025. According to a statement issued on the same day, a basic agreement has been reached between DMM Bitcoin and SBI VC Trade to facilitate the transfer of customer accounts, including deposits in both Japanese yen and crypto assets.

The agreement outlines that all user deposits in DMM Bitcoin accounts, both fiat and crypto, will be moved to SBI VC Trade once the transfer process begins. Additionally, SBI VC Trade will manage the transfer of crypto stocks held on DMM Bitcoin, further solidifying its role in the transition.

The $320 Million Hack: A Catastrophic Blow

The troubles for DMM Bitcoin began on May 30, 2024, when the exchange fell victim to a severe server breach and private key hack. The hack, referred to by the company as an “unauthorized leak,” resulted in the loss of more than 4,500 Bitcoin—an amount valued at approximately $320 million. The stolen funds were taken from a single wallet.

In the aftermath of the hack, DMM Bitcoin halted withdrawals, new account openings, and trading on its platform. The company assured customers that all deposits would be fully guaranteed and stated that it would procure the equivalent amount of Bitcoin to compensate affected users. This move was supported by DMM Bitcoin’s parent company, which helped secure additional funds for reimbursement.

However, despite these assurances, the situation continued to deteriorate. In July 2024, blockchain investigator ZachXBT reported that about $35 million of the stolen crypto had been laundered through Huione Guarantee, a marketplace notorious for hosting crypto scams. There were also suspicions that the Lazarus Group, a well-known cybercrime organization, might have been behind the attack due to the similarities in laundering techniques used.

DMM Bitcoin's Struggles and Strategic Shifts

Founded in January 2018, DMM Bitcoin is owned by the DMM Group, a Japanese e-commerce conglomerate. However, the hack was just the beginning of a series of setbacks for the company. In November 2024, DMM Crypto, a subsidiary of DMM Bitcoin, announced the discontinuation of its Seamoon Protocol. This Web3 platform, which featured gaming and anime content, had been a key part of DMM’s strategy to expand into the blockchain ecosystem.

DMM Crypto had also been working on launching its own stablecoin in partnership with Progmat, a stablecoin platform, to strengthen its presence in the ecosystem. However, the company cited “recent rapid changes in the business environment” as a major obstacle to the project’s sustainability, further hinting at the financial difficulties and uncertainty facing DMM Bitcoin.

Rising Hacks and Challenges for Centralized Exchanges in 2024

DMM Bitcoin’s liquidation comes amid a troubling year for centralized cryptocurrency exchanges. In 2024 alone, WazirX, an exchange based in India, was hacked for $235 million in July, while BingX, a Singaporean exchange, lost $52 million in September. Additionally, in June 2024, the BtcTurk exchange, based in Turkey, suffered an exploit of its hot wallet, resulting in losses of up to $55 million.

As centralized exchanges face increased scrutiny and vulnerabilities, DMM Bitcoin’s liquidation serves as a cautionary tale of the risks inherent in crypto trading platforms. The company's move to transfer customer assets to SBI VC Trade marks the end of an era for one of Japan's earliest crypto exchanges, leaving many to question the future of centralized exchanges in the volatile crypto market.