Daily Management Review

As North Korea Cranks Up Its Missile Tests, A Cryptocurrency Fall Threatens Its Stolen Riches


As North Korea Cranks Up Its Missile Tests, A Cryptocurrency Fall Threatens Its Stolen Riches
According to four digital investigators, the cryptocurrency market crash has wiped out millions of dollars in assets stolen by North Korean hackers, endangering a crucial source of financing for the sanctions-hit government and its weapons programmes.
North Korea has put resources into stealing cryptocurrencies in recent years, transforming it into a formidable hacking threat and resulting in one of the greatest cryptocurrency heists on record in March, when about $615 million was stolen, according to the US Treasury.
The abrupt drop in cryptocurrency values, which began in May amid a larger economic slowdown, hinders Pyongyang's capacity to profit from that and other heists, and may have an impact on how it plans to fund its weapons programmes, according to reports quoting sources from the South Korean government.
It comes as North Korea conducts a record number of missile launches this year, which the Korea Institute for Defense Analyses in Seoul believes has cost up to $620 million, and prepares to resume nuclear testing amid an economic crisis.
North Korean crypto holdings monitored by the New York-based blockchain analytics firm Chainalysis, which include funds taken in 49 thefts from 2017 to 2021, have declined in value from $170 million to $65 million since the start of the year, according to the company.
According to Nick Carlsen, an analyst with TRM Labs, another U.S.-based blockchain analysis firm, one of North Korea's cryptocurrency caches from a 2021 heist, which had been worth tens of millions of dollars, has lost 80 percent to 85 percent of its value in the last few weeks and is now worth less than $10 million.
The $615 million March attack on blockchain project Ronin, which powers the popular online game Axie Infinity, was carried out by the Lazarus Group, according to US authorities.
Carlsen stated that the interrelated price swings of the many assets involved in the theft made estimating how much North Korea was able to preserve from the crime challenging.
If the same attack occurred today, the stolen Ether money would be valued little more than $230 million, but North Korea exchanged nearly all of it for Bitcoin, which has experienced independent market swings, he said.
"Needless to say, the North Koreans have lost a lot of value, on paper," Carlsen said. "But even at depressed prices, this is still a huge haul."
According to the US, Lazarus is under the direction of the Reconnaissance General Bureau, North Korea's top intelligence agency. It has been accused of being involved in the "WannaCry" ransomware attacks, hacking multinational banks and consumer accounts, and the Sony Pictures Entertainment cyber-attacks in 2014.
Analysts are hesitant to share specifics about the sorts of cryptocurrency North Korea possesses because doing so could reveal investigation methods. Chainalysis reported that Ether, a common cryptocurrency tied to the open-source blockchain platform Ethereum, was 58 percent , or around $230 million, of the $400 million stolen in 2021.
Chainalysis and TRM Labs trace transactions and uncover probable crimes using publicly available blockchain data.
Sanctions monitors have identified such activities, and according to public contracting documents, both corporations cooperate with US government agencies such as the IRS, FBI, and DEA.
North Korea is subject to severe international sanctions as a result of its nuclear programme, limiting its access to global trade and other sources of cash and making crypto heists appealing, according to the investigators.