Feb 15, 2023

The recent collapse of the FTX exchange has rocked the cryptocurrency world and those involved in it to its core. Since the world’s third-largest crypto exchange declared itself bankrupt, it has sent a ripple effect across the entire cryptocurrency market.

However, amongst the many people who have suffered due to the FTX scandal are some rather unlikely characters in a dark and mysterious corner of Asia. Yep, we’re talking about North Korea.

Did you know North Korea’s infamous nuclear program has largely been funded by stolen crypto? Well, it is, and many people are now keen to know what effect the collapse of FTX will have upon the notorious dictatorship.

The Democratic People’s Republic of Korea & Cryptocurrency

Largely isolated from the outside world, the Democratic People’s Republic of Korea or simply North Korea, has been under brutal sanctions from the West for decades. Nevertheless, one of the main aims of the DPRK regime is to develop a formidable arsenal of nuclear weaponry.

However, nuclear arsenals aren’t cheap, so the regime has always sought innovative and crafty ways to fund its ambitions. Most recently, the theft of people’s crypto has become a reliable way for North Korea to do so.

Despite its everyday citizens being cut off from the internet, although they have a local intranet system, the regime has a team of elite hackers who are set loose on the internet with the mission to steal as many cryptocurrencies as possible. The bulk of the proceeds of crime goes straight towards funding the country’s nuclear weapons. This has been a tried and tested tactic the DPRK government has used for years.

However, it’s no secret that these are troublesome times for the cryptocurrency market. Not only have cryptocurrency prices dipped drastically in recent months, the collapse of the FTX exchange and a series of other high-profile incidents bringing negative attention to crypto means the stolen crypto vaults of North Korea have been devalued enormously.

Naturally, this means that many government analysts expect North Korea’s nuclear weapons program to cease operations or, at the very least, begin to slow down and lose momentum. But is it true, or is it just wishful thinking?

Inside the World of North Korean Crypto Hackers

Within North Korea, it’s hard to get a solid number of just how many state-sponsored hackers there are due to the intensely secretive nature of the country. However, it’s thought that the country could have anywhere up to 7,000 local hackers who are either based in the DPRK or dispatched abroad with permission from the country’s regime.

Plus, it’s said that the DPRK government are also providing financial backing to a series of international hacking organisations, such as:

• Lazarus Group (also known as the Guardian of Peace and Whois Team)
• Advanced Persistent Threat 38 (APT38)

North Korea identified the effect of cyber warfare several years ago and invested heavily in its hacking arsenal for over a decade. Although we’re led to believe that the DPRK is technologically inferior, nobody wants a cyber army of this calibre knocking on their virtual door. Put simply, the average crypto owner can’t stop.

For example, just take one of Lazarus’ previous hacking missions that took place in 2016. The infamous hacking group targeted the national bank of Bangladesh to steal over $1 billion. However, due to a type in the computer code that the hackers used, they could only steal $81 million. Nevertheless, it was an exceptionally brutal heist and sowed fear into people worldwide, bolstering the group’s reputation.

Following their notorious 2016 heist, Lazarus began to shift its attention to decentralised currencies. Between January 2017 and September 2018, it’s believed that the group have successfully stolen billions of dollars worth of crypto from various exchanges, such as:

• $571 million between January 2017 and September 2018
• $316 million from 2019 to November 2020
• $840 million in the first five months of 2022 alone

It’s said that the DPRK has successfully pulled off various crypto heists that have bagged the regime more than $1 billion worth of crypto this year alone. A sizeable part of this haul originates from another infamous but lucrative attack pulled off by Lazarus when they launched a targeted attack upon Axie Infinity, an NFT-focused game that saw over $620 million stolen from the online game.

When discussing global governments with a state budget, a couple of billion might not seem a lot. However, this is North Korea. To put all these stolen funds into context, it’s estimated that the DPRK only earned about $142 million from its total trade exports in 2020.

These statistics show that cryptocurrency-related crime is no joke. These days, it’s increasingly vital to opt for a platform with solid security protocols that actively try their best to protect their users. Many experts and only publications advise crypto users to check xBitcoin Capex app to stay ahead of increasingly advanced hacking techniques plaguing the market since this specific platform has proven itself over time.

How Much Has the DPRK Lost in the Current Crypto Market?

Again, due to the secretive nature of North Korea combined with the extremely cloak-and-dagger nature of hacking groups in general, guessing how much crypto has actually been stolen and utilised by the regime in the DPRK is exceptionally difficult, as is finding out how much they have left. However, we can draw upon the experts of various opinions to get a basic idea.

For example, let’s consider what Nick Carlsen said about the situation. A former FBI analyst turned blockchain analyst, Carsten recently stated that he believed the DPRK’s vaults of stolen crypto had suffered dramatically in the currency crypto market and could have lost up to 85% of its total value, leaving the regime with a balance of under $10 million which, naturally, doesn’t go far in the world of nuclear weapons.

Following the dramatic collapse of the FTX exchange, it’s expected that the cryptocurrency stash of North Korea will suffer even more. Recent reports have claimed that the DPRK owned more than $170 million in stolen crypto, which stems from a series of hacking events between 2017 and 2021. In addition, reports also make the interesting claim that the native ETH token of the Ethereum blockchain is the most widely used crypto by the North Korean regime, making up well over 50% of combined crypto thefts carried out by the sanctioned state.

Ethereum and its native ETH is a powerhouse of crypto and is the second largest digital currency according to market cap. However, like almost all other cryptocurrencies, its value dipped dramatically after the collapse of FTX and still remains far from its all-time high.

This means that the regime in Pyongyang will be forced to sit on their stolen crypto and wait for an unpredictable amount of time before it rises once again. When that happens, market analysts will be waiting to try and get an accurate insight into how much crypto the DPRK government has and how much is left.

Why Is the DPRK Stealing So Much Crypto?

From human rights abuses to nuclear missile tests on the doorstep of neighbouring countries like Japan, North Korea has been heavily sanctioned by the West and other Asian countries. However, this hasn’t stopped the regime from conducting an increasing number of missile tests and taunting their many enemies.

The North Korean leader, Kim Jong-un, recently told the country’s state media that his ultimate mission is to develop the most powerful strategic missile force on earth, one that has never been seen before in the 21st century.

Plus, when you combine these intense sanctions from various countries with the severe effect of the COVID-19 pandemic (and subsequent shutdown of the North Korean border), things have been especially difficult for the DPRK to trade with their few friendly states and make money. Naturally, the theft of cryptocurrency and the lucrative rewards it often brings the regime has become one of its few attractive options.

After all, crypto is a largely unregulated industry worldwide, and many governments are currently scrambling to try and regulate it by any means but are struggling to do so. Plus, crypto transactions are faster, don’t require involvement from central banks, and are far more anonymous.

Plus, hacking a crypto exchange is significantly more straightforward than hacking a central bank which is fortified by high-tech security protocols and often requires clients to visit them in person.

Friends in Decentralised Places

And it’s not just theft that the DPRK is utilising to boost their crypto arsenal. The decentralised nature of the country means it is far easier to move it across international borders, whether a state is sanctioned or not. Incredibly, some of the crypto flooding into North Korea comes from very unlikely places.

For example, the arch nemesis of the DPRK, South Korea, has many pro-North Korean supporters living undercover throughout the country. Many of these people use cryptocurrency to discreetly fund the regime in Pyongyang and support the “Juche” ideology, the Marxist-Leninist political idea that dominates the DPRK.

And then there’s even support from North Korea’s second biggest enemy, the United States. Recently, Virgil Griffith, a cryptocurrency expert based in the U.S., was charged with assisting the regime in Pyongyang to dodge U.S. Government sanctions by utilising crypto.

How Will the Current Crypto Market Impact Missile Tests?

So, to sum up this article, it’s a given that the recent price dips across the cryptocurrency markets combined with the collapse of the FTX exchange will have certainly had a dramatically negative impact on the nuclear ambitions of the DPRK regime.

However, the threat is far from over. It’s expected that, despite the current market conditions, the various hackers and hacking techniques the North Korean government employs will continue to thrive and will become more advanced as the regime attempts to expand its methods of drawing income into the sanctioned nation.

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