Feds claw back $30 million of cryptocurrency stolen by North Korean hackers

Cryptocurrency analytics firm Chainalysis said on Thursday that it helped the US government seize $30 million worth of digital coins that North Korean-backed hackers stole earlier this year from the developer of the non-fungible token-based game Axie Infinite.

When accounting for the more than 50 percent fall in cryptocurrency prices since the theft occurred in March, the seizure represents only about 12 percent of the total funds stolen. The people who pulled off the heist transferred 173,600 ethereum worth about $594 million at the time and $25.5 million in USDC stablecoin, making it one of the biggest cryptocurrency thefts ever.

Harder to hide

The seizures “demonstrate that it is becoming more difficult for bad actors to successfully cash out their ill-gotten crypto gains,” Erin Plante, senior director of investigations at Chainalysis, wrote. “We have proven that with the right blockchain analysis tools, world-class investigators and compliance professionals can collaborate to stop even the most sophisticated hackers and launderers.”

The FBI attributed the theft to Lazarus, the name used to track a hacking group backed by and working on behalf of the North Korean government. According to Axie Infinity developer Sky Mavis, the hackers pulled off the transfers after gaining access to five of nine private keys held by transaction validators for the Ronin Networks cross-bridge, a dedicated blockchain for the game.

The hackers then initiated an elaborate laundering process that involved transferring funds to more than 12,000 different currency addresses in an attempt to obfuscate the stolen coins’ movement.

In Thursday’s post, Plante wrote:

North Korea’s typical DeFi laundering technique has roughly five stages:

1. Stolen Ether sent to intermediary wallets
2. Ether mixed in batches using Tornado Cash
3. Ether swapped for bitcoin
4. Bitcoin mixed in batches
5. Bitcoin deposited to crypto-to-fiat services for cashout

Last month, the US Treasury Department sanctioned the virtual currency mixer Tornado Cash after finding it has been used to launder more than $7 billion worth of virtual currency since its creation in 2019. $455 million of that sum was connected to the heist against Axie Infinity.

Plante continued:

Since then, Lazarus Group has moved away from the popular Ethereum mixer, instead leveraging DeFi services to chain hop, or switch between several different kinds of cryptocurrencies in a single transaction. Bridges serve an important function to move digital assets between chains and most usage of these platforms is completely legitimate. Lazarus appears to be using bridges in an attempt to obscure source of funds. With Chainalysis tools these cross chain funds movements are easily traced.

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