DOJ Seeks to Recover Millions Tied to North Korean Crypto Scheme
The United States Department of Justice (DOJ) has initiated a civil forfeiture action to seize nearly $7.74 million in cryptocurrency. This move is part of a crackdown on a scheme allegedly involving North Korean IT workers utilizing digital currencies to circumvent international sanctions.
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Remote Work, Blockchain Sector, and Money Laundering Techniques
According to the DOJ’s press release on June 5, these funds were amassed by workers who misrepresented their identities to secure jobs within blockchain-focused companies. These remote workers, operating under the aegis of the North Korean regime, leveraged the cryptocurrency market to evade US sanctions and channel illicit earnings back to the Democratic People’s Republic of Korea (DPRK).
The seized assets are linked to a continuing investigation that traces back to an April 2023 indictment against Sim Hyon Sop, a China-based agent of North Korea’s Foreign Trade Bank. Sim, along with North Korean IT specialists, stands accused of deploying diversified laundering strategies to obscure the illicit financial flows. The DOJ asserts that this effort is part of a larger North Korean strategy to exploit global cryptocurrency networks to generate revenue, defying international embargoes.
Innovative Evasion Tactics
The DOJ’s complaint highlights the DPRK’s increasing deployment of IT experts across various locations, including China and Russia, with directives to infiltrate the blockchain and tech industries. These workers allegedly circumvented know-your-customer (KYC) and due diligence protocols by employing stolen or counterfeit documentation to mask their true identities and geographical locations. Their remuneration, often in stablecoins like USDC or USDT, was systematically laundered and redirected to North Korea.
To further obscure the sources of these funds, the workers reportedly engaged in sophisticated laundering maneuvers, such as creating accounts with fictitious identities, executing numerous small transactions, switching between different blockchains, converting assets into other digital currencies, and even acquiring non-fungible tokens (NFTs) as a means of asset storage. The proceeds were allegedly funneled through online US-based platforms and intermixed to elude detection, with the help of intermediaries like Sim and Kim Sang Man.
International Efforts to Combat Sanctions Evasion
Kim Sang Man, as mentioned in the DOJ documentation, is believed to be the head of Chinyong, also known as Jinyong IT Cooperation Company, which operates under the aegis of North Korea’s Ministry of Defense. Chinyong, sanctioned by the US Treasury Department, is purportedly responsible for managing contingents of North Korean IT workers in nations such as Russia and Laos. Kim’s role reportedly involved transferring funds from the IT workforce to Sim, thereby completing the cycle of crypto laundering back to the North Korean regime.
This case underscores a broader strategic initiative by US authorities to dismantle illicit financial networks. Officials from the DOJ, the FBI, and national security departments have emphasized the importance of targeting North Korea’s digital revenue streams to uphold sanctions and restrict resources available for military advancements. US companies have also been urged to scrutinize remote hiring processes to identify potential subterfuge strategies employed by foreign operatives.
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