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The US Department of Justice released today court documents detailing their pursuit of 280 North Korean accounts linked to money laundering and fraud in an impressive criminal scheme.
The Justice Department today filed a civil forfeiture complaint detailing two hacks of virtual currency exchanges by North Korean actors. These actors stole millions of dollars’ worth of cryptocurrency and ultimately laundered the funds through Chinese over-the-counter (OTC) cryptocurrency traders. The complaint follows related criminal and civil actions announced in March 2020 pertaining to the theft of $250 million in cryptocurrency through other exchange hacks by North Korean actors.
US Department of Justice
These hackers first stole millions in cryptocurrency then used Chinese OTC (over-the-counter), cryptocurrency traders, to launder the stolen money. While the money laundering took place in China, these hackers are believed to be North Korean citizens which would indicate that this criminal web might be quite large.
Anonymity is one of the founding pillars of cryptocurrency and while it often allows it more freedom and equality than other financial systems, it has also often attracted criminals. However, while the parties involved in a trade can often keep their anonymity, the trades in themselves are often public record.
Don Fort, chief of the Cybercrimes unit of the IRS, explained that the hackers had used “highly sophisticated laundering techniques” but they were still able to laboriously trace the funds through hundreds of anonymous wallets and exchanges back to the hackers.
The hackers used a process known as “chain hopping”, the US court document revealed. This process involves laundering funds through intermediary adresses and virtual exchanges, converting the stolen crypto to Bitcoin or Tether in order to obfuscate the transaction path.
Finally, this might not be the only instance of criminal activity we have seen from this group as the court document also stipulates that the funds tied to these hacks were allegedly laundered by the same Chinese OTC group than previous hacks that happened in March of this year.
Over-the-counter crypto traders represent without a doubt a great risk to the security and the reputation of cryptocurrency but their popularity is only growing. While they can bring cryptocurrency to a large part of the population, and duly so represent a great opportunity for growth in the ever-important chinese market, they also allow increasingly dangerous criminal action as these hackers learn to use them to their advantage.
In September 2019, North Korean hackers also breached a crypto business in the US and quickly laundered $2.5 million through an intricate network of more than 100 accounts at another virtual currency exchange and chinese OTC traders, making the stolen funds very difficult to locate.
The Department of Justice, however, vouches to pursue these leads and dedicate the Cybercrimes Unit of the IRS to the thorough pursuit of these criminals and the dismantling of their network.