Crypto hack alarms escalate as authorities crack down on $3.7 billion theft

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The rapid growth in cryptocurrency theft in recent years has become a major concern for US authorities, who are stepping up their efforts to crack down on hackers and illicit cryptosystems.

Last year alone, hackers managed to steal an estimated $3.7 billion worth of digital assets, with North Korean state-sponsored cyber actors being the main culprits in many of these heists, according to TRM Labs, a blockchain intelligence company.

Although this year has seen a drop in crypto hacks compared to 2022, around $400 million worth of virtual currency was stolen in the first quarter of 2023, TRM Labs reported.

In recent years, North Korean state-sponsored cyber actors have aggressively targeted the crypto industry, often taking advantage of an industry that is not well understood by many and is not well regulated.

North Korean flags are carried during a celebration of the 73rd anniversary of the founding of the nation in Pyongyang, North Korea, September 9, 2021. (Associated Press).

U.S. and United Nations officials have reported that stolen crypto funds have become a major source of revenue for North Korea’s nuclear and ballistic missile program.

“The problem has become very large and very serious, with North Korean cybercriminals accounting for around $1 billion worth of stolen crypto last year,” said Ari Redbord, global head of policy and government affairs at TRM Labs.

“With North Korea, it’s not about personal financial gain. Stolen crypto is used to fund arms proliferation and other destabilizing activities,” Redbord said, adding that it has become a “serious threat to national security”.

A senior Biden administration cyber official also raised similar concerns about North Korea’s role in the crypto hacks.

Anne Neuberger, the administration’s deputy national security adviser for cyber and emerging technologies, said last year that she was “concerned about North Korea’s cyber capabilities,” adding that the country is using “up to to a third of [stolen crypto] funds to finance their missile program.

Neuberger added that North Korea’s expansion of its missile testing is a top priority for the administration, which has taken several enforcement actions to counter the country’s cyber threats, including imposing sanctions on criminal groups and seizing stolen digital assets.

Last year, the FBI confirmed that North Korean-sponsored hackers known as the Lazarus Group, who had been sanctioned by the Treasury Department for targeting critical infrastructure, were responsible for the theft of approximately $620 million in cryptocurrency from the Axie Infinity virtual game.

Immediate and serious impacts

Crypto hacks have become a major concern for many parties, especially those investing in cryptocurrency, as they could see their savings or investments wiped out, experts said.

“In the age of the Internet, a hack means the loss of usernames and passwords,” Redbord said. “In the age of crypto hacks, this could mean the loss of savings or the ability of North Korea or other state actors to fund malicious activity.”

Redbord also said it’s now more important than ever for law enforcement and regulators to keep pace in the digital space as they crack down on cybercrime.

Josephine Wolff, associate professor of cybersecurity policy at Tufts University Fletcher School, said law enforcement should be concerned about all types of cybercrime, because whether it’s cryptographic hacks, cyberattacks, cyber espionage, cyber war or disinformation campaigns, they are all connected. somehow.

“You don’t want to say, ‘Oh, we only care about disruptive cyberattacks,’ when the way many criminals fund these disruptive cyberattacks may be at least in part through cryptocurrency crime” , said Wolff.

Like Redbord, Wolff agreed that another reason to worry about crypto hacks is that people are losing a lot of money because they feel “the impact of this quite immediately and quite severely.”

Russia targets crypto to evade sanctions Russian President Vladimir Putin attends a meeting with members of the Business Russia organization at the Kremlin in Moscow on May 26. (Mikhail Klimentyev, Sputnik, Kremlin Pool Photo via AP)

Although North Korea is the world leader in crypto hacking, Russia has also engaged in such activity to evade economic sanctions and fund projects it deems important to its national security interests, experts have said. .

“I think for countries like North Korea and now Russia that are facing a lot of sanctions, you could imagine that money would be used for pretty much anything that a government wants to do but finds it hard to fund. “, said Wolff.

Just last week, the Justice Department unveiled charges against two Russian nationals accused of participating in a 2011 hack of cryptocurrency exchange Mt. Gox.

The agency said the two Russian defendants were charged with conspiracy to launder approximately 647,000 bitcoins from the Mt. Gox hack.

Redbord said Russia, which was trying to evade US economic sanctions, had participated in various crypto schemes. Russia colluded with Iran to conduct cross-border cryptocurrency exchanges and used paramilitary groups to raise crypto funds to support Russia’s war in Ukraine.

“While none of these efforts moved the needle dramatically, over time they can have an impact,” Redbord said.

How did the United States react? The Treasury building is seen in Washington in 2021. (AP Photo/Patrick Semansky, File)

In recent years, US authorities have stepped up their efforts to combat crypto hacks, including imposing sanctions on entities and crypto mixers, indicting individuals, and seizing domains.

In March, the DOJ said it took down a darknet cryptocurrency mixer, known as ChipMixer, which allowed cybercriminals to launder more than $3 million in digital assets.

The agency said it seized two domains that directed users to the mixing service, which was involved in other illegal activities including ransomware, fraud, cryptocurrency heists and other hacking schemes.

And last year, the Treasury Department sanctioned Tornado Cash, another cryptocurrency mixer, for helping hackers launder more than $7 billion worth of virtual currency.

Tornado Cash has enabled cyber groups, including North Korean-backed hackers, to use its platform to launder the proceeds of cyber crimes, the Treasury said.

Wolff said that while it can be difficult to deter cybercriminals from engaging in these activities, law enforcement can shut down some of their infrastructure, such as cracking down on illicit crypto mixers.

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Last year, blockchain data firm Chainalysis published a report which found that the use of crypto mixers hit an all-time high in 2022, with state-sponsored actors and cybercriminals making up a large portion of users.

In 2022, illicit addresses accounted for 23% of funds sent to mixers, up from 12% in 2021, according to the report.

“As we see cybercriminals becoming more and more sophisticated, the law enforcement agencies and the tools they use to track and trace funds are also improving,” Redbord said.

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