North Korea Looks To Bitcoin As Sanctions Bite

As sanctions against the authoritarian nation intensify, leadership are looking to a new way to circumvent the financial system - cryptocurrencies


North Korea appears to be stepping up efforts to secure Bitcoin and other cryptocurrencies that could be used to avoid additional trade restrictions.

North Korean hackers are increasing their attacks on cryptocurrency exchanges in South Korea and related sites, according to a new report from security researcher FireEye.

They also breached an English-language Bitcoin news website and collected Bitcoin ransom payments from global victims of the malware WannaCry, according to the researcher.

Kim’s apparent interest in cryptocurrencies comes amid rising prices and popularity.

The same factors that have driven their success — lack of state control and secretiveness — would make them useful fundraising and money-laundering tools for a man threatening to use nuclear weapons against the US.

With tougher sanctions just approved, and usage of cryptocurrencies broadening, security experts say North Korea’s embrace of digital cash will only increase.

'We definitely see sanctions being a big lever driving this sort of activity,' says Luke McNamara, a researcher at FireEye and author of the new report. 'They probably see it as a very low-cost solution to bring in hard cash.'

So far this year, FireEye has confirmed attacks on at least three South Korean exchanges, including one in May that was successful.

Around the same time, local media reported that Seoul-based exchange Yapizon lost more than 3,800 Bitcoins (worth about $15m at current rates) due to theft, although FireEye said there were no clear indications of North Korean involvement.

North Korea’s diplomats and official media have denied the country played any role in cyberattacks, including the hacking of Sony Pictures Entertainment in 2014.

South Korea believes North Korea operates an army of hackers expanding its focus from military espionage to financial theft.

The regime’s Reconnaissance General Bureau, which reports directly to Kim, handles peacetime cyber operations from espionage to network disruptions and employs an estimated 6,000 officers, according to a 2016 report from the International Cyber Policy Centre at the Australian Strategic Policy Institute.

In the recent round of attacks, South Korea may have become a target not just due to its proximity to Pyongyang and their shared language, but because the country has become one of the busiest trading hubs for cryptocurrencies this year.

Seoul-based Bithumb is the world’s biggest exchange for Ethereum. In June, it said hackers had stolen customer information from an employee’s computer, without identifying the attackers.

'As more money goes into cryptocurrency exchanges and more people buy Bitcoin and Ethereum, exchanges become larger targets for this group,' says McNamara.

He says so far he does not have evidence that Kim’s regime has targeted cryptocurrency exchanges outside South Korea, but he does not rule out the possibility in the future.

Besides exchanges, FireEye said an English-language Bitcoin news website was breached by North Korea, which would likely allow hackers to identify people visiting the site. It declined to name the website and said it believed North Korea preferred larger targets like exchanges to individual owners of cryptocurrencies.

The firm said previously it had found a connection between Pyongyang and the WannaCry attack of May and June, which affected more than 300,000 computers worldwide.

McNamara says he also sees indications North Korean hackers are getting involved in cryptocurrency mining.

Attacks on the South Korean exchanges were carried out through so-called spear-phishing attacks, or e-mailing files laced with malware to specific targets.

FireEye identified the malware, known as PEACHPIT, and provided examples of documents it was attached to, including one published by Seoul-based Hyundai Research Institute about the state of Bitcoin industries.

When contacted, the author of the report confirmed he wrote it in 2014, but was unaware that someone was distributing a press release about it this year.

The group behind the hacks, which FireEye identified as TEMP.Hermit, has made a name for itself out of Bitcoin theft, including a 2015 attack on South Korea’s nuclear industry. The hackers have also been tied by other security firms to last year’s attack on Samsung Electronics’ corporate messenger app and, most prominently, the breach of Sony’s film studio, which the FBI blamed on North Korea.

'They’re pretty capable actors in comparison to other North Korean activity we see,' said McNamara. "They’ve been creative in how they use their cyber-espionage capability."

The malware used in bitcoin hacks is linked to the group suspected of attacks on the payment systems of global banks last year, according to FireEye.

The FBI is also examining North Korea’s link to the theft of $81m through the New York Fed last year, Bloomberg Markets reported last month.

FireEye said if the hackers wanted to convert bitcoin or Ethereum into Dollars or Won, they’d probably first exchange them into harder-to-trace cryptocurrencies such as Monero and then into fiat currency.

A similar technique was used last month to empty the Bitcoin wallets related to WannaCry.


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