Hacked crypto exchange sold for $34 million to Japan's Monex

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Coincheck Inc., the cryptocurrency exchange that lost about $500 million of customer deposits to hackers in January, was acquired by Monex Group Inc. in a deal that sent shares of the Japanese retail brokerage soaring to a five-year high.

Monex will pay 3.6 billion yen ($34 million) for Coincheck and agree to split profits with current shareholders for the next three years, the company said in a statement on Friday. Coincheck’s management, including current head Koichiro Wada, will step down as part of the deal and be replaced by a Monex executive.

The acquisition follows a two-month saga that has gripped Japan’s virtual currency industry and prompted calls for tighter regulation in one of the world’s most crypto-friendly nations. For Monex, it provides a new product to complement its existing services selling foreign-exchange and stocks to individual investors in Japan.

“I’m very excited about Coincheck joining our family,” said Monex Chief Executive Officer Oki Matsumoto at a press conference together with Wada on Friday. Matsumoto said he’s used the venue for years to invest in cryptocurrencies and has even dabbled with building his own personal mining rig. “Cryptocurrencies are becoming an incredibly important asset class, one that we can no longer ignore.”

Monex shares jumped by the daily limit of 20 percent after the announcement. The company has gained about 40 percent -- adding $330 million in market capitalization -- since the Nikkei newspaper reported on Tuesday that the company was mulling an investment in Coincheck.

Coincheck’s business results for the latest fiscal year were not made available, but for the 12-month period through March 2017 it generated 980 million yen in revenue and 471 million yen in net income from its core business. That paled in comparison to the 76.3 billion yen the company earned from the sale of investments in cryptocurrencies.

Matsumoto said he sees Coincheck growing into a major crypto arm for Monex, and wants to eventually hold an initial public offering for the unit, without specifying a timeline. He said he expects Coincheck to receive a license and restart operations within two months. Speaking at a separate press conference, officials at Japan’s Financial Services Agency said they were unaware of such plans and will continue to review Coincheck’s application for a license.

Wada owned 45 percent of Coincheck shares, while Chief Operating Officer Yusuke Otsuka held 5.5 percent, according to Monex’s statement. Coincheck’s other shareholders included Tokyo-based venture firm Incubate Fund and California-based WiL LLC, Coincheck executives said at press conference in January.

The purchase comes after Monex in January announced its highest quarterly net income in three years, thanks to a broad market rally at the end of last year that generated strong commission revenue from retail customers. The firm recorded a 2.6 billion yen profit on 12.6 billion yen in revenue. As of December, Monex held 98.1 billion yen in cash and cash equivalents.

The sale is the latest chapter in a rapid rise and fall for Wada, the engineer who turned Coincheck from a blogging platform into Japan’s second-largest bitcoin exchange. At a press conference last month, Wada said Coincheck had enough resources to continue operating, but that he would heed the regulator’s calls for “drastic management reform.” Wada and Otsuka will remain as executive directors at Coincheck, although they will hold no shares, according to Monex’s statement.

After the theft in January, Coincheck used company funds to compensate the 260,000 victims at rates that exceeded the coins’ market value at the time of the reimbursement.

Bloomberg News
Cryptocurrencies Japan