The blockchain intelligence firm Chainalysis announced on Thursday that it has successfully assisted law enforcement in seizing $30 million in crypto stolen by North Korean hackers of the Lazarus group.
The ill-gotten proceeds were connected to the infamous Axie Infinity hack in March – the largest hack in decentralized finance (DeFi) to date.
How the Funds Were Recovered
According to the firm’s statement, the event marks the first time that stolen cryptocurrency has ever been seized from a North Korean hacking group.
Chainalysis has been investigating the hack since March of 2022, using “advanced tracing techniques” to track down the hacker’s cash-out points. By cooperating with law enforcement and other industry players, the firm helped find and seize roughly 10% of the total funds stolen in the hack.
“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,” said Chainalysis.
The funds were initially stolen after hackers gained access to five of the nine validator keys that controlled the Ronin network’s cross-chain bridge.
This allowed them to drain 173,600 Ether (ETH) and 25.5 million USD Coin (USDC). from the play-to-earn game Axie Infinity’s treasury across two separate transactions. The funds were cumulatively worth over $600 million at the time, yet their theft wasn’t noticed until roughly a week after the hack.
In the following weeks, the hacker used a number of common techniques to erase the on-chain footprint of his funds. These included transferring them across multiple intermediary addresses, mixing them through Tornado Cash, and transferring them over to the Bitcoin blockchain.
Crypto’s Suitability for Money Laundering
Due to the transparency of cryptocurrency, Chainlysis was able to “easily” trace the hackers’ chain hopping activity.
“This would never be possible in traditional financial channels, where money laundering usually involves networks of shell companies and financial institutions in jurisdictions that may not cooperate,” explained Chainalysis.
In March, U.S. Senator Elizabeth Warren grilled Chainalysis co-founder Jony Levin about the potential for sanctioned entities to hide billions of dollars worth of laundered funds by using techniques like those tried by the Lazarus Group. At the time, Levin denied that such large sums could effectively be concealed on a blockchain.
The annual Chainalysis crypto crime report indicates that the absolute volume of money laundered through crypto is rising over time. However, its share of total volume across the cryptocurrency ecosystem continues to fall.