According to blockchain investigator ZachXBT, Circle has been implicated in financial transactions linked to the infamous North Korean hacking group, Lazarus Group. This severe accusation has raised eyebrows in the crypto community.
Accusations Against Circle
The allegations surfaced after Circle reportedly delayed its blacklisting of funds associated with the Lazarus Group for over four months. This duration is significantly longer than other major stablecoin issuers took for similar actions. ZachXBT expressed his frustration on social media, highlighting Circle’s platform-wide failures in combating money laundering.
“Not once have you ever blacklisted after a DeFi exploit/hack when there was ample time, while you continue to profit off the transactions.”
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The Lazarus Group Hack
The Lazarus Group is notorious for its cybercriminal activities and was recently held responsible for hacking the Indonesian crypto exchange Indodax on September 11. This breach resulted in the theft of over $20 million, leading to a temporary shutdown of the exchange to assess the damages.
Once the investigation was complete, Indodax gradually resumed its services, including deposits, withdrawals, and staking services. ZachXBT reported that four stablecoin issuers – Tether, Circle, Paxos, and Techteryx – have blacklisted two addresses linked to the Lazarus Group, which hold a combined total of $4.96 million in various stablecoins.
Additionally, exchanges have frozen another $1.65 million belonging to the hackers, bringing the total amount of frozen funds to approximately $6.98 million. Ongoing investigations reveal a troubling trend: stablecoins are being utilized to launder stolen funds. Evidence suggests that the Lazarus Group managed to launder around $200 million from various crypto exploits into stablecoins like USDT and USDC between 2020 and 2023.
Circle’s Delayed Response
ZachXBT’s accusations have ignited a firestorm against Circle, particularly targeting its CEO, Jeremy Allaire. Critics argue that Circle prioritizes profit over the integrity of the crypto ecosystem. “They pretend in public that it’s the compliant stablecoin meant to help protect the ecosystem but is in reality not exactly true,” ZachXBT commented. He noted that despite having a sizable staff, Circle lacks an incident response team to address issues arising from DeFi hacks or exploits.
This criticism comes at a time when discussions about stablecoin regulation and anti-money laundering efforts are intensifying. The crypto community is increasingly concerned about the potential risks posed by stablecoins, especially when they are linked to state-sponsored hacking groups like Lazarus.
The Bigger Picture
The Lazarus Group has allegedly stolen $3 billion from the digital currency industry in numerous high-profile attacks. These stolen funds are believed to support the North Korean regime-backed hacking organization’s weapons development initiatives.
The crypto market’s total capitalization currently stands at $2.05 trillion. As the crypto space continues to evolve, the relationship between stablecoins and illicit activities remains a critical issue that demands immediate attention and action from regulators and industry stakeholders alike.
