The tremendous rise in cryptocurrency theft in recent years has become a major concern for US officials, who are stepping up efforts to crack down on hackers and illegal crypto operations.
According to TRM Labs, a blockchain intelligence firm, crypto hackers were able to steal roughly $3.7 billion in digital assets from the cryptocurrency industry. Many of these heists were mostly carried out by North Korean state-sponsored cyber actors.
The number of cryptocurrency breaches has decreased this year compared to 2022, but according to TRM Labs, over $400 million in virtual money was taken in the first quarter of 2023.
State-sponsored cyber hackers with ties to North Korea have been actively targeting the cryptocurrency market over the past few years, frequently taking advantage of a poorly understood and unregulated sector.
Stealing cryptocurrency has reportedly become a significant source of funding for North Korea’s nuclear and ballistic missile programmes, according to U.S. authorities and the United Nations.
According to Ari Redbord, global head of politics and government affairs at TRM Labs, the situation has gotten extremely huge and very dangerous, with North Korean thieves accounting for nearly $1 billion in stolen crypto last year.
With North Korea, it is not about pursuing individual financial gain. According to Redbord, stolen cryptocurrency is becoming a real national security issue because it is used to finance the proliferation of weapons and other unsettling activities.
Similar worries about North Korea’s involvement in cryptocurrency hacking were also voiced by a senior cyber official in the Biden administration.
North Korea uses up to a third of [stolen cryptocurrency] funds to support its missile programme, according to Anne Neuberger, the administration’s deputy national security adviser for cyber and emerging technology, who expressed alarm about the nation’s cyber capabilities last year.
The expansion of North Korea’s missile tests, according to Neuberger, has been a high concern for the government, which has taken a number of enforcement measures to tackle the nation’s cyberthreats, such as applying penalties against criminal organizations and seizing stolen digital assets.
The Lazarus Group, a group of North Korean-sponsored hackers that the Treasury Department had designated for targeting critical infrastructure, was proven by the FBI to be in charge of the theft of nearly $620 million in cryptocurrencies from the online game Axie Infinity last year.
Immediate, severe impacts
Cryptocurrency hacks have grown to be a serious worry for many people, especially those who invest in the currency because they risk having their money or investment lost, according to experts.
According to Redbord, in the digital age, a hack entails the loss of usernames and passwords. In the era of cryptocurrency hacks, it may result in the loss of life savings or give North Korea or other nation-state actors the power to finance nefarious activities.
In addition, Redbord stated that in order to combat cybercrime, it is now more crucial than ever for regulators and law enforcement to keep up the pace in the digital sphere.
According to Josephine Wolff, an associate professor of cybersecurity policy at the Fletcher School at Tufts University, law enforcement should be concerned about all types of cybercrimes because they are all connected in some way, including crypto hacks, cyberattacks, cyberespionage, cyberwarfare, and disinformation campaigns.
You don’t want to say, “Oh, we only care about disruptive cyberattacks,” Wolff said, because a lot of criminals may fund those disruptive cyberattacks in part by engaging in crypto crime.
Like Redbord, Wolff concurred that another factor to consider when considering cryptocurrency hacks is the fact that many people are losing a significant amount of money as a result of “the impact of this pretty immediately and pretty severely.”
Russia eyes crypto for sanctions evasion
Despite the fact that North Korea dominates the crypto hacking world, experts claimed Russia has also engaged in such activities to get around economic sanctions and fund initiatives it considers crucial to its national security goals.
According to Wolff, he believes that for countries facing a lot of sanctions, such as North Korea and now Russia, the money would be utilized for pretty much everything that a government seeks to do but finds difficult to fund.
Just last week, the Department of Justice unveiled charges against two Russian citizens who are suspected of taking part in a 2011 breach of the crypto exchange Mt. Gox.
According to the service, the two Russian suspects were accused of planning to launder around 647,000 crypto obtained during the Mt. Gox breach.
Redbord claimed that Russia, which has been attempting to avoid American economic sanctions, has taken part in a number of cryptocurrency schemes. Russia and Iran worked together to conduct cross-border cryptocurrency trading, and Russia used paramilitary organizations to raise money in cryptocurrency to assist its war in Ukraine.
Redbord added that while none of these initiatives have had a particularly significant impact so far, they may do so in the future.
How has the United States responded?
U.S. authorities have stepped up their efforts in recent years to combat cryptocurrency hacking, including sanctioning organizations and cryptocurrency mixers, charging individuals, and seizing domains.
The DOJ announced in March that it had taken down ChipMixer, a darknet cryptocurrency mixer that had been used by fraudsters to launder more than $3 million in digital assets.
The government claimed to have taken control of two domains that led customers to the mixing service, which was also engaged in fraud, malware, cryptocurrency heists, and other hacking schemes.
Additionally, Tornado Cash, another cryptocurrency mixer, was penalized by the Treasury Department last year for aiding hackers in transferring more than $7 billion in virtual currency.
Using Tornado Cash’s platform, cybercriminal organisations, including those with North Korean support, were able to launder the proceeds of their crimes, according to the Treasury.
Wolff added that while it may be difficult to stop cybercriminals from carrying out these crimes, law enforcement can obstruct some of their infrastructure by, for example, cracking down on unauthorized crypto mixers.
According to a forecast published by blockchain data company Chainalysis last year, the use of crypto mixers peaked in 2022, with a substantial portion of users being state-sponsored actors and online criminals.
According to the research, illegitimate addresses received 23% of the money transferred to mixers in 2022, up from 12% in 2021.
Law enforcement and the resources they use to track down and trace money are also improving, Redbord added, even if we are seeing cybercriminals grow more skilled.
