Exploring North Korea’s Techniques for Laundering Stolen Cryptocurrency
The Hermit Kingdom, which intelligence agencies assert was responsible for the $1.5 billion breach of Bybit, faces significant obstacles when attempting to launder the sizable quantities of stolen cryptocurrency.
Overview
- Since 2017, North Korea has managed to pilfer over $5 billion from the crypto landscape.
- Their hackers recently extracted $1.5 billion from Bybit, posing challenges for asset conversion.
- Ari Redbord, from TRM Labs, highlights the difficulty of laundering such immense amounts due to a lack of appropriate laundering facilities.
How North Korea Launders its Crypto
Every time North Korea successfully targets a cryptocurrency entity, such as the Bybit hack on February 21, it encounters substantial hurdles in transferring its assets out of the crypto sphere.
It can’t transfer funds to prominent exchanges like Binance or Coinbase due to compliance controls. Instead, it relies on a network of over-the-counter (OTC) brokers for laundering, as Redbord notes. “They will seek out global exchanges that lack compliance mechanisms.”
Beyond China, Redbord reveals, “Russia has been a significant hub for money laundering and neglects regulations.” North Korea has even utilized casinos in Macau for converting cryptocurrency into fiat.
Off-ramping Challenges
North Korea has not utilized crypto for international expenses; rather, it converts the assets into major currencies such as the Chinese renminbi or U.S. dollar. However, given the sheer quantity of stolen assets, off-ramping proves to be a significant obstacle, posing risks of detection and freezing of funds by authorities.
The Bybit incident exemplifies this issue, illustrating that North Korea’s stolen Ethereum has generally been swapped into Bitcoin using protocols like THORswap.
The Aftermath of Laundering
Once converted through OTC brokers, follow-up tracking becomes vexatious for blockchain analytics, but remains within reach of governmental entities like the FBI and other agencies using advanced intelligence techniques. Past instances, such as the Colonial Pipeline ransomware recovery, showcase the potential for recovering stolen assets.
Despite utilizing Chinese shell companies for laundering, continuous monitoring by U.S. agencies presents complications for North Korea’s laundering efforts.
In a notable prior case from 2019, U.S. prosecutors issued subpoenas to Chinese banks connected to North Korean laundering, showcasing the complexities of jurisdiction in international finance.
As noted by Redbord, the current administration may be poised to engage further with these issues, indicating that a focused approach on minor banks is viable to undermine illicit financial operations.
