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The United States Department of Treasury has imposed sanctions on three individuals allegedly involved in helping the Lazarus Group, notorious cyber hackers, convert stolen cryptocurrency to fiat currency to fund the Democratic People’s Republic of Korea’s (DPRK) unlawful weapon of mass destruction (WMD) and ballistic missile programs. The OFAC has sanctioned Wu Hiuhui based in the People’s Republic of China, Cheng Hung Man based in Hong Kong, and Sim Hyon Sop, who recently relocated to China and worked for the Korea Kwangson Banking Corp. Wu facilitated millions of dollars in the conversion of stolen cryptocurrency to fiat currency for Lazarus Group in 2021, while Cheng assisted him by making payments to companies to receive cryptocurrency. Sim, on the other hand, coordinated millions of dollars in financial transfers for the DPRK.
The DPRK reportedly uses networks of over-the-counter (OTC) traders to avoid detection by financial institutions or competent authorities. In a press statement, the Treasury Department noted that Sim directed Wu, Cheng, and other OTC traders to transfer stolen cryptocurrency to front companies, which would then purchase goods, including tobacco and communication devices, in fiat currency on behalf of the DPRK. Any individuals or foreign institutions that conduct certain transactions with the designated individuals could also risk being sanctioned.
According to a statement by Brian E. Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence, this use of illicit facilitation networks to generate revenue using virtual currency directly threatens international security.
Meanwhile, the OFAC announcement noted that the Lazarus Group is controlled by the DPRK’s Reconnaissance General Bureau (RGB), its primary intelligence organization. The group is notorious for several cyber incidents in the crypto industry, including the largest-ever crypto hack involving the Ronin Network, which saw a loss of $620 million. Chainalysis reported in a February 2023 update that the group stole crypto worth $1.7 billion in 2022.
