Good day everyone,
I hope you are all well and had an excellent week, welcome to CryptoGod-1’s blog on all things crypto. In this post I will be discussing the recent report highlighting the success of North Korea in stealing crypto, with an apparent $600 - $700 million stolen by hackers from the state.
State Sponsored Attacks
It has emerged that North Kora was responsible for more than $600 million worth of crypto being stolen in 2023 according to blockchain intelligence company TRM labs. This was announced on Friday the 5th of January 2024 in a post on the analytics data firm's website. They have suggested within the report that the total loss could be closer to $700 million following a number of unconfirmed hacks committed at the end of 2023. These are thought to have been committed by North Korea but as of yet remain unconfirmed.
The news will be music to the likes of Senator Elizabeth Warren, who has been pushing a Digital Asset Anti-Money Laundering Act. This act would have far reaching consequences for those involved in cryptocurrency within the United States, although the Senator has been pushing the act with the promise of regulation and stopping the financing of terrorism.
The data from TRM labs has come after a year in which the United States government enacted a number of sanctions against everal of North Korea’s state-sponsored crypto-related malware initiatives. These have included the crypto mixer Sinbad and hacking collective Lazarus Group. The mixer and hacker group are known to share an aim of obtaining virtual currency to support military financing in North Korea. The report noted how hacks carried out by the Democratic People's Republic of Korea (DPRK) were on average ten times more damaging as those not linked to North Korea. Almost $3 billion has been lost to Pyongyang-linked threat actors since 2017.
Within the report TRM labs notes that crypto-related hacks from the DPRK which were backed by the North Korean government were ten times more damaging than their counterparts. U.S. Deputy Treasury Secretary, Wally Adeyemo, noted in November 2023 that “While we encourage responsible innovation in the digital asset ecosystem, we will not hesitate to take action against illicit actors.” This came following the sanctions imposed on crypto mixer Sinbad.
Brian E. Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence, noted following the imposing of sanctions last year:
“The DPRK’s use of illicit facilitation networks to access the international financial system and generate revenue using virtual currency for the regime’s unlawful weapons of mass destruction (WMD) and ballistic missile programs directly threatens international security. The United States and our partners are committed to safeguarding the international financial system and preventing its use in the DPRK’s destabilizing activities, especially in light of the DPRK’s three launches of intercontinental ballistic missiles (ICBMs) this year alone.”
At the time a TRM report had noted that North Korean bad actors had managed to steal $200 million worth of cryptocurrencies from January-August 2023. That account for over 20% of all stolen crypto during that period. The methods used by the DPRK for money laundering methods constantly evolve to evade international law enforcement pressure. In the past they have been known to victims’ digital assets to wallet addresses controlled by North Korean operatives, which are then swapped mostly for USDT or Tron. They are then converted into to hard currency using high-volume OTC brokers. Even the United States applying hard-hitting sanctions last year have not stopped the DPRK.
The North Korean government have been responsible for one-third of all funds stolen in crypto attacks in 2023 and managed to steal almost $1.5 billion over the past two years. This demonstrates the hacking prowess of the nation and how increased international collaboration in tracking and recovering stolen funds to help tackle the threat. Noted as "the world’s most prolific cyber-thief” within the report by TRM labs, the existing notable advancements in cybersecurity has still not been enough to deter the hackers.
Senator Warren notable mentioned the topic of North Korean hackers and how they are using the funds to finance half their nuclear program. She stated this while speaking to Andrew Ross Sorkin on NBC's Squawk Box back on the 7th of December 2023. At the time she called this form of terrorist financing a new threat. She was widely and heavily criticised within the crypto community, with many stating this was just another push for her Digital Asset Anti-Money Laundering Act.
Warren’s latest legislation poses a threat to the existing cryptocurrency ecosystem, and more importantly its core principals of freedom and personal sovereignty. She has argued that her bill is required to combat illegal and illicit activities and this latest report could help strengthen her position once again. The bill, co-sponsored by Kansas Senator Roger Marshall, was brought about under the premise of digital assets increasingly being used for criminal activities such as money laundering, ransomware attacks and terrorist financing.
However, the bill is also considered quite dangerous to crypto as a whole due to its requirement for digital asset developers to comply with Bank Secrecy Act (BSA) responsibilities. This includes things such as and Know Your Customer (KYC) requirements. The burden of the law is therefore effectively placed upon the shoulders of software developers, and not the law enforcement.
The bill will also look to eliminate privacy tools that protect crypto users from malicious actors. These are items such as digital asset mixers and anonymity-enhancing technologies. Warren’s proposal threatens the privacy rights of law-abiding citizens and places privacy in a category of a privilege instead of a right. Another concern is the bills approach to “unhosted” digital wallets. These can be used to bypass Anti-Money Laundering sanctions and requirements and while they can be used as a bad tool, the solution within the bill means banks and money service businesses would be requried toto verify customer identities. They would also need to file reports on certain transactions involving "unhosted" wallets and this is expected to result in some unintended consequences.
This could push users away from cryptocurrency, given the privacy of process is one of the most alluring aspects of crypto. Added to that is the lack of balance between security and individual rights. Finding a way to regulate and even enforce the sanctions and other requirements against bad actors in the space is always a positive. My feeling behind this report by TRM labs is that Senator Warren will be loading up her cannons to fire when next addressing the public regarding her Digital Asset Anti-Money Laundering Act. Balance, and not total enforcement, is the key to success in this field and that is something Senator Warren could do with figuring out.
Have a great day.
Peace. CryptoGod-1.
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