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Where Does North Korea Go as The Crypto Bubble Bursts

The US Department of Justice is reportedly considering charging executives of Binance, the world’s largest cryptocurrency exchange, with various criminal charges, including for money laundering and sanctions violations. This comes after the recent collapse of the FTX cryptocurrency exchange and this week’s arrest and indictment of its founder and former CEO Sam Bankman-Fried.

Before it imploded, FTX was once the world’s third-largest cryptocurrency exchange. It was not a well-run enterprise. In addition to non-existent risk controls and generally chaotic management, there appears to have been some serious fraud happening there, and even the fraud was amateurish and chaotic. John Ray III, the new CEO of FTX appointed to clean up the bankruptcy, told the US House Financial Services Committee that as opposed to the sophisticated financial crimes committed at Enron in the 1990s, FTX’s management engaged in “really just old fashioned embezzlement”.

“This is just taking money from customers and using it for your own purpose. Not sophisticated at all,” Ray continued.

We wonder what effects a “crypto winter” might have on cybercrime. Over the last year some of the most sophisticated hacks have involved North Korean groups just stealing cryptocurrency. Blockchain analysis company Chainalysis estimated in September that North Korea-linked groups had stolen about USD$1bn of cryptocurrency from DeFi protocols. These virtual dollars have been easy pickings for the North Koreans, but we wonder if the opportunities to steal cryptocurrency will be fewer and also less lucrative.

North Korea has been quite agnostic about how it has stolen money and in addition to cryptocurrency theft has also over time tried ATM cash-outs schemes, ransomware and also stolen from traditional banks by manipulating interbank SWIFT messages.

Stealing USD$1bn in funny money to fund North Korea’s nuclear program is bad, but all the other schemes it has tried over the years are worse in that they cause more collateral damage, like undermining confidence in the global financial system.

Anyway, this is just our way of saying the average bank and credit union CISO might have to deal with a particularly nasty threat actor returning to their risk register in 2023. Good times!

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