Shocking DOJ Crypto Seizure: US Targets $7.7M in North Korea Laundering Plot
The world of cryptocurrency is constantly evolving, and unfortunately, not all activity is legitimate. A recent development highlights the serious challenges posed by illicit finance within the digital asset space. The US Department of Justice (DOJ) has taken significant action in a case involving North Korea, aiming for a major DOJ crypto seizure.
US Moves Against North Korea Crypto Laundering
The US Department of Justice is seeking to seize $7.74 million in cryptocurrency and other digital assets. These funds are allegedly linked to efforts by North Korean IT workers who used fake identities to gain employment as remote contractors at blockchain companies. The civil forfeiture complaint, filed on June 5 in a Washington, DC federal court, targets various cryptocurrencies, stablecoins like USDC and USDT, Bitcoin (BTC), non-fungible tokens (NFTs), and Ethereum Name Service (ENS) domains held across multiple self-custody wallets and Binance accounts.
The funds were initially frozen in April 2023 following an indictment against Sim Hyon Sop, a banker based in China accused of assisting these workers in laundering money.
How North Korean IT Workers Operated
According to the DOJ, the North Korean IT workers involved in this plot were active internationally. They allegedly used fraudulent identification documents and other deceptive methods to secure jobs within the blockchain and crypto industry. By presenting themselves as legitimate remote contractors, they earned significant amounts, often paid in stablecoins.
This scheme underscores the challenges faced by remote hiring processes in verifying identities and backgrounds, a vulnerability that malicious actors are actively exploiting.
Techniques Used in Crypto Laundering
Once paid, the workers allegedly employed various crypto laundering techniques to obscure the origin and movement of the funds. These methods included:
- Chain hopping: Moving funds between different blockchain networks.
- Token swaps: Exchanging one type of cryptocurrency for another, including converting funds into NFTs.
The DOJ alleges that the ultimate goal was to send these laundered funds back to the North Korean government, facilitated by individuals like Sim Hyon Sop and Kim Sang Man, the latter already sanctioned by the OFAC for money laundering offenses.
Broader US Crypto Enforcement Efforts
This case is part of a larger pattern of activity by North Korea seeking to exploit the crypto ecosystem. Matthew Galeotti, head of the Justice Department’s criminal division, emphasized that the US government is committed to using all legal tools available for US crypto enforcement to protect the ecosystem and prevent North Korea from using illicit gains to fund its priorities.
Authorities have issued warnings about North Korea’s increasing focus on the crypto industry. A 2022 joint advisory from the DOJ, Department of State, and Treasury alerted the public to the influx of North Korean workers into freelance tech jobs, particularly in crypto. More recently, a Google report in April detailed North Korea’s expansion of infiltration efforts to blockchain firms outside the US, with a focus on Europe. Blockchain investigators like ZachXBT have also highlighted sophisticated networks of North Korean developers earning substantial amounts working for crypto projects.
Summary
The US DOJ’s action to seize $7.74 million in crypto underscores the ongoing threat posed by North Korea’s exploitation of the digital asset space for illicit finance. By using fake identities and employing sophisticated crypto laundering techniques, North Korean IT workers allegedly earned funds intended for the North Korean government. This significant DOJ crypto seizure highlights the commitment to US crypto enforcement and the importance of vigilance within the industry against threats like those emanating from North Korea crypto operations.
