How North Korea used crypto to hack its way through the pandemic


By Choe Sang-Hun and David Yaffe-Bellany, The New York Times Company

SEOUL, South Korea — North Korea’s economy has been ravaged by United Nations sanctions and the coronavirus pandemic. The government has warned of a severe food shortage. An unidentified intestinal disease began spreading among citizens in June.

And yet the country has conducted more missile tests this year than in any previous year. The government is giving new luxury homes to party elites. Kim Jong Un, North Korea’s leader, has promised to develop advanced technology for the nation’s growing weapons arsenal. A new nuclear test — the country’s seventh — is expected to happen any moment.

Where has the money come from?

In April, the United States identified a key part of the puzzle when it publicly accused North Korean hackers of stealing $620 million in cryptocurrency from the video game Axie Infinity. The theft, one of the largest of its kind, provided the strongest evidence that cryptocurrency heists have become a highly lucrative yet relatively risk-free way for North Korea to raise funds to buttress the regime during the pandemic and to finance its weapons development.

Poor, isolated and heavily sanctioned, North Korea has long resorted to illicit activities to gin up badly needed cash. It has trafficked in weapons, illegal drugs and counterfeit U.S. $100 bills. Its workers have dug tunnels for the Myanmar military and built statues and monuments for African dictators. It has unleashed hackers to disrupt foreign websites and steal from corporations and banks.

More recently, with its borders shut because of the pandemic and traditional banks strengthening their firewalls against hackers, cryptocurrency theft has become an increasingly vital source of foreign currency for the regime. Its hackers are accused of stealing $571 million from cryptocurrency exchanges between January 2017 and September 2018 and $316 million from 2019 to November 2020.

North Korean hackers may have walked away with nearly $400 million in cryptocurrency last year, according to the crypto data firm Chainalysis. This year, North Korea’s haul is up to a little under $1 billion. To put those figures into context, the country earned only $89 million in official exports in 2020, according to South Korea’s government-run statistical agency.

Cryptocurrencies are hardly a stable source of funding. Over the last two months, the market has crashed spectacularly, erasing hundreds of billions of dollars in investments and sending the price of Bitcoin below $20,000 for the first time since late 2020. North Korea had crypto holdings worth $170 million at the end of last year, according to Chainalysis — funds that the country had stolen but not converted into cash. That stash was worth only $65 million as of last week.

But at a time when North Korea has locked itself down for fear of the pandemic, hacking crypto exchanges has allowed it to generate income in ways that are both COVID-safe and harder to trace in an industry subject to limited government oversight.

As its hackers roam cyberspace launching devastating attacks, North Korea runs little risk of being targeted itself because most of the country is offline. “For North Korea, it’s a low-cost, low-risk but high-return criminal enterprise,” said Yoo Dong-ryul, a former chief anti-terrorism analyst at the South Korean national police agency.


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