To fund regime, North Korea hacked crypto exchanges, ran ICOs: report

North Korea, which has described itself as a self-reliant socialist state, has been hacking cryptocurrency exchanges in South Korea as well as running ICOs to raise money, according to extraordinary reports.

Following previous research from cybersecurity researchers at Inksit Group, the North Korean state has been flagged as a persistent bad actor in crypto circles, hacking into South Korean exchanges as well as setting up their own fake ICOs to raise money for the regime.

According to the report, North Korean authorities are increasingly leveraging crypto markets to their advantage, both in raising funds for the regime and in circumventing international sanctions, including their exclusion from the SWIFT network for international payments.

“We discovered that North Korea’s ruling elite are technologically savvy, use a full range of older and cutting-edge computers, phones, and devices, use the internet as a tool for sanctions circumvention, and recently shifted to embrace Chinese social networking services over Western ones,” the Inksit Group stressed.

In a report published back in January, Inksit linked hackers Lazarus Group with the North Korean state, and pinpointed a series of attacks using similar Bitcoin Core (BTC) malware and ransomware to target a number of victims, including Sony Pictures and South Korean exchange Coinlink.

Per the findings published this week, these types of scams appear to be increasing, which researchers suggest is being fuelled by international sanctions against the regime.

The team noted, “Broadly, these types of cryptocurrency scams fit the template of low-level financial crime described by defectors that has plagued South Korea for years, and that the international community is just beginning to track. It is a natural step for both a group of actors that has been so embedded in the cryptocurrency world for years and for a network that is being forced to innovate new funding streams to counter the effects of international sanctions.”

The report identified the Marine Chain project as being one example of an initial coin offering (ICO) that was funding the North Korean government, as well as uncovering a network of so-called “enablers” based in Singapore working on a number of similar projects. The findings show rogue governments are still drawn to BTC scams and ICOs, adding further weight behind calls for more scrutiny and regulation of the sector internationally.