KuCoin hack’s $285M recovered or insured: CEO Johnny Lyu

Crypto exchange KuCoin saw $285 million worth of crypto assets be siphoned out of its wallets in a hack last year, but still reportedly sustained no losses.

According to an open letter by KuCoin CEO Johnny Lyu published on Feb. 3, a collaboration between KuCoin, its partners and other cryptocurrency exchanges allowed the firm to recover 78% of the losses—equivalent to $222 million—while cooperation with law enforcement allowed the company to retrieve a further 6%, or $17.45 million. The remaining 16% ($44.55 million) was completely covered by the platform’s insurance contract. Lyu said:

“In the end, we ensured that no users sustained any loss in this incident, and we have since greatly strengthened our security level.”

Lyu described cybersecurity as “the sword of Damocles hanging over the head of crypto exchanges,” acknowledging that it remains a major problem for companies operating in the space.

That one theft accounted for 55% of all cryptocurrency funds lost to thefts in 2020—$516 million, according to blockchain intelligence firm CipherTrace. That number does not include frauds and exit scams, which drive the total loss to crime in 2020 up to $1.9 billion.

As for KuCoin, Lyu said that the countermeasures and reactions taken by the exchange proved to be quite effective:

“In the end, we ensured that no users sustained any loss in this incident, and we have since greatly strengthened our security level.”

What’s more, the KuCoin CEO also claims that the company had gathered intelligence about the perpetrators, and the investigations were ongoing. Lyu also explained that—despite the hack—2020 has been a great year for the exchange, as its trading volume increased 217% year on year and its futures contracts “have achieved a stunningly rapid 420% increase in trading volume and a remarkable 670% growth in user numbers.”

Overall, Lyu presumably expects this growth to continue since he believes that Bitcoin will overtake gold. The KuCoin CEO is in good company believing that the first cryptocurrency is a threat to gold’s status as the most important store of value asset.

As Modern Consensus reported in early January, Wall Street star and SkyBridge Capital founder Anthony Scaramucci said that “Bitcoin is better at being gold than gold” and that if the new digital gold’s market cap reaches just half of old yellow gold’s—about $5 trillion—BTC’s value would increase tenfold. Later in the same month, asset management firm CCB International Securities sold one-third of its gold holdings for Bitcoin as its portfolio director recognized it as “a widely accepted asset class.”