On thursday, the blockchain intelligence firm Chainalysis announced that it has successfully assisted law enforcement agents in recovering $30 million in cryptocurrency stolen by North Korean hackers from the Lazarus group. The stolen funds were connected to the notorious Axie Infinity hack in March, widely regarded as the largest hack in decentralized finance (DeFi) history to date.
According to Chainalysis’ statement, this is the first time that stolen cryptocurrency has ever been recovered from a North Korean hacking group. Chainalysis has been investigating the hack since March of 2022, using advanced tracing strategy to track down the hacker’s cash-out points. By cooperating with law enforcement and other cryptocurrency industry players, the firm helped to find and recover roughly 10% of the total funds stolen in the attack.
The funds were stolen after hackers gained access to five of the nine validator keys that controlled the Ronin cross-chain bridge. This allowed them to steal 173,600 Ether (ETH) and 25.5 million USD Coin (USDC) from Axie Infinity’s treasury in two separate transactions. The stolen funds were cumulatively worth over $600 million at that time, yet their theft went unnoticed until roughly a week after the attack.
In the weeks that followed, the hacker used a number of common techniques to erase the on-chain footprint of the stolen funds. These included transferring them across multiple middle-man addresses, mixing them using Tornado Cash and transferring them to the Bitcoin blockchain.
Due to the transparency of cryptocurrency, Chainlysis was able to easily trace the hackers’ chain hopping activity. Chainalysis said “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 possibility of sanctioned entities to hide billions of dollars worth of laundered money by using techniques like those tried by the Lazarus Group. At the time, Levin denied that such large funds could be effectively concealed on a blockchain. The annual Chainalysis cryptocurrency crime report shows that the total volume of money laundered through cryptocurrency is rising.
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