Created by a Vietnamese gaming studio, Axie Infinity offers players the chance to breed, trade and fight Pokémon-like cartoon monsters to earn cryptocurrency.
It also includes the game’s own “Smooth Love Potion” digital token. At one stage, it had more than a million active players.
How Exactly North Korea Started To Dominate The Cryptocurrency Space?
But earlier this year, the network of blockchains that underpin the game’s virtual world was raided. It was by a North Korean hacking syndicate. One that made off with roughly $620m in the ether cryptocurrency.
The FBI confirmed the crypto heist, one of the largest of its kind in history. The FBI also vowed to “continue to expose and combat [North Korea’s] use of illicit activities. This includes cyber crime and cryptocurrency theft — to generate revenue for the regime”.
The successful crypto heists illustrate North Korea’s growing sophistication as a malign cyber actor.
Furthermore, western security agencies and cyber security companies treat it seriously. They treat it as one of the world’s four principal nation state-based cyber threats. They put it alongside China, Russia, and Iran.
However, according to a UN panel of experts monitoring the implementation of international sanctions. This money raised by North Korea’s criminal cyber operations is helpful. They fund the country’s illicit ballistic missile and nuclear programmes.
Meanwhile, Anne Neuberger, US deputy national security adviser for cyber security, said in July that North Korea “uses cyber to gain, we estimate, up to a third of their funds for their missile programme”.
North Korea Link To FTX Crash
Crypto analysis firm Chainalysis estimates that North Korea stole approximately $1bn. This was stolen in the first nine months of 2022 from decentralized crypto exchanges alone.
The rapid collapse last week of FTX, has highlighted the opacity and erratic regulation. The kind that have been the central features of the market for digital assets.
North Korea’s growing use of crypto heists have also served a purpose. One that demonstrates the absence of meaningful international regulation of the same markets.
Analysts say the scale and sophistication of the Axie Infinity hack exposed just how powerless the US and allied countries appear to be to prevent large-scale North Korean crypto theft.
Only about $30m of the crypto loot has since been reacquired. That was after an alliance of law enforcement agencies and crypto analysis companies traced some of the stolen funds. This they did through a series of decentralized exchanges and so-called “crypto mixers.” This is a software tool that can shuffle the crypto holdings of different users so as to obfuscate their origins.
How Law Enforcement Are Trying To Combat This Cryptocurrency Cybercrime
Furthermore, in one of the few law enforcement actions since the theft, in August the US sanctioned the Tornado Cash mixer. The US Treasury said the hackers used this to launder more than $450m.
The US has since designated the crypto mixer. This Crypto mixer is instrumental in the hands of hackers. Hackers who were in turn supporting the country’s weapons of mass destruction programme.
Furthermore, it also highlights the opportunities afforded by the unregulated world of crypto to many other rogue regimes and criminal actors around the world. This is with experts warning that the problem is likely only to get worse over the decade as crypto exchanges are increasingly decentralized and more goods and services — legal and illicit — are made available for purchase with cryptocurrency.
“We are not anywhere near where we need to be when it comes to regulating the cryptocurrency industry.” The above statement was by Allison Owen, a research analyst at RUSI’s Centre for Financial Crime and Security Studies.