Zaif, also known as “Fisco”, is a centralized cryptocurrency exchange, based in Tokyo, Japan with exact address 5-11-9 Minami Aoyama, Minato-ku, Tokyo 107-0062. The platform was founded in 2014 and was at first operated by a company called Tech Bureau. It made the headlines thanks to the investments it managed to secure from the Japanese brokerage Money Partners Group. However, in November 2018, it was sold to the publicly listed FISCO Digital Asset Group Co. Ltd – another Japanese brokerage and owner of the “Fisco” cryptocurrency exchange. According to reports, the deal cost Fisco 5 billion Japanese Yen ($44.675 million).
Zaif was among the first Japanese cryptocurrency exchanges to obtain a license from the local regulator - the Financial Services Agency (FSA). At the time of this writing, the platform is headed by Ryuji Yagi. The management team is also comprised of Toshiya Kotake, Norifumi Imai, Takayoshi Abe, Kenji Yamaguchi, and Osamu Fukami. However, at this point, there is limited information about the background of the mentioned individuals as the majority of them don’t even have LinkedIn profiles.
The information on Zaif’s homepage states that the platform offers “trading between users, where users make a profit by setting prices”, which indicates that the exchange is P2P. It also adds that it provides support for token issuers (the service is under the name of “Zaica”) and a feature called “Social Tip”, where users can send cryptocurrencies to Twitter users without a fee. Zaif also has an affiliate program and allows for margin trading with leverage up to 7.77. The exchange’s clients can take advantage of a prepaid “wallet card”, called “Manepa Card”, that allows them to withdraw and charge Japanese Yen from their Zaif accounts. However, due to the poorly translated website, further details on the listed features can’t be found.
One of the concerning facts regarding Zaif is the lack of adequate customer support. The only way to reach the exchange’s representatives is through submitting an inquiry. However, users on Reddit and Bitcointalk express their frustrations that the majority of the submitted questions are left unaddressed.
Regarding security, Zaif’s team points out that they employ standard measures such as SSL encryption, two-factor authentication, and cold storage wallets. However, these measures proved to be insufficient as Zaif became the victim of one of the biggest hacks of a Japanese cryptocurrency exchange. In September 2018, the platform suffered a cyberattack that resulted in the loss of 7 billion Japanese Yen or $60 million worth of cryptocurrencies (mainly Bitcoin, Bitcoin Cash, and MonaCoin). The attack became possible because the exchange kept the funds in a hot wallet and hackers managed to get unauthorized access and drain them all. At the time, the owner of the exchange was Tech Bureau. In fact, the hacker attack was the main reason why it sold the business to Fisco.
However, despite the scale of the attack, it is worth noting that the exchange owners handled the case very professionally. First, the registration of new customers and the deposits into the cryptocurrencies, subject to the hacker attack, were suspended. Tech Bureau, the owner at the time, promised to refund all customers, who hadn’t moved their accounts to Fisco. In fact, the company said that in order to protect customers from having to bear extra charges, it would perform all refunds in Japanese Yen (JPY) to the clients’ registered bank account. Soon after all users were refunded, Tech Bureau closed its cryptocurrency business.
After the attack, the exchange worked in close cooperation with Japan Digital Design, a leading Japanese cybersecurity company and a subsidiary of Mitsubishi UFJ Financial Group (MUFG), alongside with governing authorities in an effort to trace down the hackers. Working in conjunction with other security firms, Japan Digital Design revealed that, after investigating the outflow of MonaCoin soon after the attack, they were able to identify the attackers. However, they didn’t share any additional information but insisted on having passed all the details regarding the cybercriminals to the local authorities.
At the time of this writing, there are plans from Fisco to merge the Fisco and Zaif exchanges. As the primary reason for that, Fisco states that they want to “enable efficient operation of the cryptocurrency exchange business.”
According to a release by the Financial Services Agency (FSA), Fisco was a subject to an investigation over its management practices and was charged with “legal violations”. The exchange operators were forced to improve their business management systems as the local financial watchdog found multiple problems such as issues with the business plans, lack of proper risk management measures, lack of adequate AML policies, and terrorism-financing restrictions. A month later, the exchange issued a release, stating that it has covered all the needed points and has handed it to the FSA for approval. At the time of this writing, there is no progress on the decision of the Japanese financial watchdog.