Crypto laundering techniques

Crypto Laundering: A New Tactic

North Korea’s hackers have found a novel way to launder stolen crypto from the Binance hack. According to a report from blockchain analytics firm Elliptic, the launderers are creating their own worthless meme coins and using them to shuffle stolen funds through decentralized exchanges.

The tactic involves minting a brand-new token, pairing it with a real asset like Near or a stablecoin in a liquidity pool, and then using stolen funds to buy the token. The token is then sold back through a separate set of wallets to withdraw clean-looking assets.

How it Works

The process is designed to break the direct on-chain link between the thief’s wallet and the one collecting the proceeds. By using a liquidity pool, no stolen funds move directly from the buying wallet to the collecting one, making it harder to trace the funds.

• The launderers create a new token and pair it with a real asset in a liquidity pool.
• They use stolen funds to buy the token through one set of wallets.
• They then sell the token back through a separate set of wallets to withdraw clean-looking assets.

The tactic was first observed by Elliptic on the Near blockchain, where the launderers created at least six home-made tokens, each paired with Near in its own pool. The tokens carried cartoon logos, including a bow-wearing monkey, a flag-draped duck, and an image of Elon Musk.

The Impact

The sums involved are modest, with around 117,000 Near (roughly $430,000) passing through the six tokens before flowing into stablecoins or a cross-chain bridge. However, the bulk of the stolen crypto, over $3 billion, is still parked on-chain and has yet to be laundered.

The meme-coin trick doesn’t actually hide the money, but it does slow down investigators. Elliptic stressed that the trail remains fully traceable on-chain, but the maneuver buys time for the launderers to move funds before they get flagged.

A Warning to Compliance Teams

Elliptic warned that funds arriving from a liquidity pool shouldn’t be assumed clean, especially where freshly minted tokens and a handful of trading wallets are involved. Compliance teams need to be vigilant and monitor for suspicious activity.

The use of meme coins to launder stolen crypto is a new tactic, but it’s not the first time North Korean hackers have used innovative methods to move stolen funds. Elliptic first observed this tactic last year while tracing the $1.5 billion Bybit theft, also attributed to the TraderTraitor group behind the Binance breach.

Background and Timeline

The Binance hack, which occurred in 2022, resulted in the theft of over $6.4 billion in crypto assets. The hack was attributed to the TraderTraitor group, which is believed to be linked to North Korea. Since then, the hackers have been using various methods to launder the stolen funds, including the use of meme coins.

In 2023, Elliptic reported that the hackers had created over 200 new wallets to move the stolen funds, with some wallets being used to transfer funds at a rate of one transaction per second. The use of meme coins is the latest tactic in this ongoing effort to launder the stolen crypto.

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Expert Perspective

According to Tom Robinson, co-founder of Elliptic, the use of meme coins to launder stolen crypto is a significant development in the world of crypto laundering. Robinson stated that the tactic is designed to slow down investigators and buy time for the launderers to move funds before they get flagged.

Robinson also warned that compliance teams need to be vigilant and monitor for suspicious activity, particularly where freshly minted tokens and a handful of trading wallets are involved. He emphasized that the trail remains fully traceable on-chain, but the maneuver buys time for the launderers to move funds before they get flagged.

Implications for Readers in India

The use of meme coins to launder stolen crypto has significant implications for readers in India. As the crypto market continues to grow in India, it is essential for investors and traders to be aware of the risks associated with crypto laundering.

In India, the government has taken steps to regulate the crypto market, including the introduction of the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. However, the use of meme coins to launder stolen crypto highlights the need for continued vigilance and monitoring of suspicious activity in the crypto market.

What to Watch Next

As the crypto market continues to evolve, it is essential to monitor for new developments in crypto laundering. The use of meme coins is just one tactic in the ongoing effort to launder stolen crypto, and it is likely that new methods will emerge in the future.

Readers can stay up-to-date with the latest developments in crypto laundering by following reputable sources, such as Elliptic, and by monitoring for suspicious activity in the crypto market. Additionally, readers can take steps to protect themselves from crypto laundering by being cautious when investing in new or unproven tokens, and by monitoring their accounts for suspicious activity.