[Feature] North Korea’s Rising Crypto Raids Equates Nuclear Doomsday?

What comes to mind when you think of North Korea? The country’s absolute ruler, Kim Jong Un? The never-ending missile tests? A totalitarian state with militaristic structures? Well, this isolated country is fast becoming associated with its increasing crypto raids. Crypto heists by North Korea’s hackers are not something that recently surfaced; in fact, it has been ongoing for years.

Even though the country is virtually closed off, it has conducted more missile tests this year than in any other years ─ its latest missile test occurred just earlier this month. One might ask, “Where is the money coming from?” Well, cryptocurrency theft has progressively established itself as an indispensable source of foreign currency in recent years. Lazarus Group, a cybercrime group run by the North Korean state, stole $620m in crypto from Ronin Network, a sidechain built for Axie Infinity.

There are accusations of its hackers stealing $571m from crypto exchanges from January 2017 to September 2018, and $316m from 2019 to November 2020. Just within the first five months of 2022, North Korean hackers had stolen $840m, which was over $200m more than they had plundered in 2020 and 2021 combined. Hacking crypto exchanges has allowed the country to generate revenue that makes it very tedious to trace in an industry subject to limited government oversight.

Source: Chainalysis

A former chief antiterrorism analyst at the South Korean national police agency had this to say, “For North Korea, it’s a low-cost, low-risk but high-return criminal enterprise.” By one South Korean estimate, North Korea runs an army of almost 6,800 cyber warriors ─ 1,700 hackers in seven different units and 5,100 technical support personnel. Eric Penton-Voak, a coordinator at the U.N. panel of experts, said during a webinar this April, “Make no mistake, DPRK (Democratic People’s Republic of Korea) hackers are really good. They look at really interesting and very gray, new areas of cryptocurrency because actually, A, no one really understands them, and B, they can exploit weakness.”

Ex-Ethereum developer, Virgil Griffith, was sentenced to 63 months in prison this April on charges of making an unauthorised trip to North Korea. The purpose? To attend a conference and teach North Koreans about crypto and its technology. U.S. also indicted three North Korean hackers with one of the charges being the theft of over $1.3b from banks and crypto companies. Harmony, a popular crypto platform, had lost $100m in digital currency to a thief ─ the flow of funds was channelled into a crypto mixer. And the culprit? North Korea. Then in August, the Treasury Department imposed sanctions on Tornado Cash for allegedly helping hackers launder over $7b worth of virtual currency.

Anne Neuberger, the Biden administration’s deputy national security adviser for cyber and emerging technology, expressed during an event, her concern about North Korea’s cyber capabilities. She added that, “They use cyber to gain, we estimate, up to a third of [stolen crypto] funds to fund their missile program”. She also went on to say that North Korea’s expansion of its missile testing is U.S.' top priority. The BBC reported that a United Nations report conducted this year discovered that between 2020 and 2021, North Korean-backed hackers got away with over $50m in digital assets. Another UN report in 2019 stated that using sophisticated cyber-attacks that targeted banks and crypto exchanges, North Korea had raised close to $2b to fund its weapons of mass destruction programmes.

One of the North Korean on the U.S. government's wanted list

In the past, Kim Jong Un had addressed his elite cyber attackers as “warriors” able to “penetrate any sanctions for the construction of a strong and prosperous nation.” Why crypto? Because the very essence of crypto is decentralisation, hence there is no Federal Reserve to cut them off. A cybersecurity firm, Mandiant, gave a warning this July of increased North Korean activity in crypto and that there are most likely several groups working to funnel money from crypto to the regime. The most well-known cell of hackers is Lazarus Group, but they are just one of many.

As per South Korean-United States intelligence report, the North is set to conduct its first nuclear weapons test for five years in the coming days and all this is being funded, at least largely, by stolen crypto. The recent missile launches were a “simulation” for nuclear attacks on South Korea, as claimed by Pyongyang.

The isolated state has launched 12 ballistic missiles in the last two weeks. All were short-range missiles except for the intermediate-range ballistic missile launched last Tuesday that flew over Japan

The ballistic missile launches have intensified with a record 25 missile tests just this year. Last month, a new law by North Korea’s parliament stated that nuclear missiles would be launched if South Korea or the U.S. tried to assassinate their supreme leader.

One thing is becoming clearer and clearer: crypto raids are a profitable way for the country to pump up its income so as to finance the development of its weapons and illegal nuclear and ballistic missile activities. Without worldwide regulatory constraints on crypto, nuclear armageddon will become a reality instead of remaining a myth.