Circle Under Fire for Failing to Freeze Funds Linked to North Korean Hackers
Date: 2024-09-17 Author: Henry Casey Categories: BUSINESS
Circle, the issuer of the USDC stablecoin, has come under fire from blockchain researcher ZachXBT for its delay in freezing funds linked to the North Korean hacking group Lazarus.
ZachXBT claims that it took Circle over four months to freeze addresses linked to the infamous group, while other major stablecoin issuers did so much sooner. The Lazarus group has been implicated in several major cryptocurrency thefts.
The criticism follows the September 11 hack of Indonesian crypto exchange Indodax, allegedly orchestrated by the Lazarus Group. The attack resulted in the theft of over $20 million, leading to the temporary shutdown of the exchange.
Stablecoins Used to Launder Stolen Funds
The hack has once again brought attention to the issue of stablecoins being used to launder stolen funds, particularly by cybercriminals like the Lazarus group.
According to investigations, the Lazarus Group laundered approximately $200 million in stolen cryptocurrency from various attacks using stablecoins, including USDT and USDC, between 2020 and 2023.
These findings have raised concerns about the role of stablecoins in facilitating illicit activity and the responsibility of issuers like Circle to prevent abuse.
ZachXBT’s allegations against Circle go beyond the single Lazarus hack and suggest a broader failure by the company to respond quickly to hacks in the DeFi space.
Despite having significant resources and staff, Circle allegedly lacks a dedicated incident response team to effectively address such issues.
The researcher’s allegations come amid growing calls for greater regulation of stablecoins and tougher anti-money laundering measures in the crypto industry.
Recent updates from ZachXBT show that all four major stablecoin issuers — Paxos, Tether, Techteryx, and Circle — have now frozen two addresses linked to Lazarus Group.
The total frozen assets total $4.96 million, with Circle the last to do so, having frozen the funds on September 14, 2024 — nearly five months after the other issuers.
A total of $6.98 million was frozen, including an additional $1.65 million seized from various crypto exchanges.
ZachXBT, known for its high-profile investigations, previously exposed Martin Shkreli as the creator of TrumpCoin and linked the GCR account hack to the team working on the Solana blockchain meme coin.
Crypto Projects Lost $310 Million to Fraud in August
August reportedly saw a sharp rise in cryptocurrency-related scams, with total losses of $310 million, the second-highest total of the year.
However, $10.3 million of the stolen assets were eventually recovered or returned, leaving a net loss of $300.6 million.
Phishing attacks were the most damaging, accounting for approximately $293 million of the total losses.
Two particularly large phishing incidents resulted in the theft of $238 million in Bitcoin and $55 million in the stablecoin DAI.
Aside from phishing, August saw several attacks on crypto projects.
For example, on August 6, a white hat hacker breached the Ronin Network, a third-party network based on the Ethereum Virtual Machine (EVM), stealing 4,000 ETH, which was valued at $9.85 million at the time.
In addition, flash loan attacks in August resulted in relatively smaller losses of $1.2 million compared to previous months.
In contrast to the rise in phishing and other forms of exploitation, exit scams have declined significantly, with losses amounting to $800,000 in August, compared to about $3 million in July.
