North Korea is using cryptocurrency scams to bypass UN sanctions and fund its regime, report says

North Korea is using and exploiting cryptocurrencies to bypass international regulators and help financially support its regime, a new report has revealed.

Researchers from the cyber-threat intelligence firm Recorded Future attributed two separate cryptocurrency scams in 2018 to a network of “North Korea-enablers” in Singapore, both of which were designed to con investors and funnel funds into the country.

One of the scams relates to the cryptocurrency ‘hold’, which was listed on and removed from a series of exchanges in 2018, before eventually rebranding to ‘huzu’. The authors of the report say the cryptocurrency “left its investors high and dry.”

A second scam involved a blockchain application called Marine Chain Platform and its initial coin offering (ICO) crowdfunding efforts. 

“We came across discussions of Marine Chain as a cryptocurrency in a couple of ​bitcoin forums​ in August 2018,” the researchers wrote in their report, titled ‘Shifting patterns in internet use reveal adaptable and innovative North Korean ruling elite’.

“Marine Chain was supposedly an asset-backed cryptocurrency that enabled the tokenisation of maritime vessels for multiple users and owners.”

An extensive investigation into the company and its alleged employees revealed with “high confidence” that it was in fact a scam conducted on behalf of North Korea.

North Korean hackers have previously been blamed for a cyber attack on South Korean bitcoin exchange Youbit last year, which resulted in the theft of around $72 million-worth of cryptocurrency. This interest in cryptocurrency was further highlighted in 2017 when the Pyongyang University of Science and Technology invited foreign experts to lecture students on the technology.

The mining of cryptocurrency by hijacking foreign computers has also been attributed to North Korea, with the funds funnelled into the country through the state university. Earlier this year, researchers at cyber security firm Alien Vault discovered the so-called ‘cryptojacking’ malware, saying that cryptocurrency offered a “financial lifeline” to a regime hit hard by sanctions. 

The latest report suggests that the mining of bitcoin and monero is ongoing, though remains relatively small scale.

“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 the ​international community​ is just beginning to track,” Recorded Future’s report into the cryptocurrency scams concluded.

“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.”

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