Circle accused of 'extracting' Lazarus Group hacks and faces criticism from ZachXBT

Circle, the company behind the USDC stablecoin, is being criticized by blockchain investigator ZachXBT for its delayed response to the blacklisting of funds linked to the North Korean hacker group Lazarus.

ZachXBT claims that Circle took over four months longer than other major stablecoin issuers to blacklist addresses associated with the Lazarus Group. The investigator claims that this delay allowed Circle to profit from transactions associated with the notorious hacker group, which has been involved in numerous high-profile crypto thefts.

The allegations came in the wake of a recent hack on Indonesian crypto exchange Indodax, attributed to the Lazarus Group. The September 11 attack resulted in the theft of over $20 million and forced the exchange to temporarily suspend its operations.

Research shows a disturbing trend of stablecoins being used to launder stolen funds. Evidence suggests that between 2020 and 2023, the Lazarus Group managed to launder approximately $200 million from various crypto exploits into stablecoins, including USDT and USDC. This has raised concerns about the role of stablecoins in facilitating illicit activities and the responsibility of issuers in preventing such use.

ZachXBT's criticism goes beyond the recent incident and accuses Circle of a systematic failure to respond to DeFi exploits and hacks in a timely manner. The investigator claims that despite having a large workforce, Circle does not have an incident response team to handle problems arising from DeFi hacks or exploits. These allegations come amid intensifying discussions about stablecoin regulation and anti-money laundering in the crypto space.

Major stablecoin issuers have blacklisted linked addresses

Recent updates from ZachXBT show that all four major stablecoin issuers – Paxos, Tether, Techteryx, and Circle – have now blacklisted two specific addresses associated with the Lazarus Group, freezing a total of $4.96 million. The addresses 0x36f2D3871edd59d5C06DB8F0b12bE928d5922A70 and 0x12ED7f6ed0491678764c2b222A58452926E44DB6 held various stablecoins, including USDT, BUSD, TUSD, and USDC.

According to the data provided, Circle was the last to react and blacklisted the USDC funds on September 14, 2024, almost five months after other issuers took similar actions. Another $1.65 million was frozen on various exchanges, bringing the total amount frozen as a result of the investigation to $6.98 million.

The on-chain detective has conducted a number of high-profile investigations, including unmasking Martin Shkreli as the creator of TrumpCoin and linking a GCR account hack to a Solana meme coin team.

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