US tries to seize 280 cryptocurrency accounts linked to North Korean hacks – NK News

The United States government is trying to seize 280 cryptocurrency accounts related to theft cases involving hackers linked to North Korea, according to a U.S. Department of Justice release published on Aug. 27.

The Justice Department alleges that North Korean hackers stole cryptocurrencies worth at least $298.5 million from South Korean cryptocurrency exchanges in 2018 and 2019, as well as an exchange focused on the Algorand blockchain based in the United States.

The Wall Street Journal reported that this is the first time a U.S.-based exchange is known to be hacked by North Korea. And though cryptocurrencies in theory are not supposed to be under government control, its unclear to many whether or not the U.S. really has the legal standing to seize these accounts.

Investigators from the FBI, the IRS and the U.S. Department of Homeland Security were able to track the stolen funds through unique qualities of the blockchain system. All transactions for each specific cryptocurrency are logged on a public ledger, although the identities behind the transactions are unique pseudonyms composed of letters and numbers.

Often, an individual controls many unique identities to the point where an individual could theoretically use a unique address for every transaction in which they engage.

According to the U.S. Justice Department, North Korean hackers leveraged these unique identities, as well as explicit attempts to pass themselves off as Russian and Canadian nationals when making cryptocurrency exchange accounts.

The U.S. blamed lax oversight and insufficient Know Your Customer protocols at various virtual currency exchanges, which among other services can turn alternative coins like the stolen South Korean Proton Tokens into more mainstream currencies like Bitcoin. Mainstream currencies can then be converted into real-world cash.

At first, the hackers tried to launder their stolen funds further by exchanging them for other cryptocurrencies a tactic known as chain hopping, according to the justice department filing.

Chain hopping is a tactic frequently used by individuals who are laundering the proceeds of virtual currency thefts, as the practice moves transactions from one currencys public ledger to another, obscuring the transaction trail.

Kim Grauer, head of research at a blockchain analysis company called Chainalysis, said that she has seen these tactics before.

Our research shows that, in the past, the DPRK-linked Lazarus hacking group moved most of their stolen funds to exchanges with low Know Your Customer (KYC) requirements, she said. However, more recently in 2019, they began using mixers in an attempt to obfuscate the flow of funds on the blockchain.

But the hackers primary goal was eventually transforming their stolen funds into bitcoins, according to a flowchart in the justice department filing. That way, hackers could use Over The Counter (OTC) traders who have less strict oversight compared to more automated exchanges to turn the bitcoins into U.S. dollars.

Three Chinese OTC accounts received the stolen funds, the filing stated. In March, the U.S. placed criminal charges on two Chinese nationals, Tian Yinyin and Li Jiadong also known as snowsjohn and khaleesi and sanctioned them. The two allegedly laundered $100 million worth of cryptocurrency for North Korea, turning it into real-world cash value items like gift cards and actual U.S. dollars.

In spite of the actors use of VPN services to mask their location during this theft, law enforcement was able to trace logins to an IP address within North Korea, the filing stated. It is rare for this kind of activity to be traced back to DPRK territory itself, partially because North Korea has thousands of hackers deployed abroad to avoid being identified or blamed.

As part of our commitment to safeguarding national security, this office has been at the forefront of targeting North Koreas criminal attacks on the financial system, acting U.S. attorney Michael R. Sherwin said in a Justice Department press release issued alongside the filing.

This complaint reveals the incredible skill of our Cryptocurrency Strike Force in tracing and seizing virtual currency, which criminals previously thought to be impossible, Sherwin said.

Edited by Kelly Kasulis

The United States government is trying to seize 280 cryptocurrency accounts related to theft cases involving hackers linked to North Korea, according to a U.S. Department of Justice release published on Aug. 27.

The Justice Department alleges that North Korean hackers stole cryptocurrencies worth at least $298.5 million from South Korean cryptocurrency exchanges in 2018 and 2019, as well as an exchange focused on the Algorand blockchain based in the United States.

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US tries to seize 280 cryptocurrency accounts linked to North Korean hacks - NK News