Circle is accused of profiting from the cyberattack on the Lazarus Group

According to blockchain investigator ZachXBT, Circle made money from transactions related to the notorious North Korean hacker group Lazarus Group, a serious accusation against the company.

The allegation comes after an incident in which Circle took more than four months to delay blacklisting funds associated with the group – more than a full period longer than other major stablecoin issuers.

ZachXBT took to social media to voice his displeasure, drawing attention to Circle’s platform-wide failure to combat money laundering.

He said:

“Not once have you been blacklisted after a DeFi exploit/hack, even though there was still plenty of time while you continued to profit from the transactions.”

The Lazarus Group Hack

The Lazarus Group was also blamed for the recent hack of the Indonesian crypto exchange Indodax, which took place on September 11. This hack resulted in the theft of over $20 million from this exchange, after which it was temporarily shut down to assess the damage caused.

Fuck circle, fuck @jerallaire You don't care about the ecosystem except that you gain something from it.

You have never been blacklisted after a DeFi exploit/hack, even though there would have been plenty of time while you continued to profit from the transactions.

It took them 4.5 months longer than anyone…

— ZachXBT (@zachxbt) 14 September 2024

After the comprehensive investigation, Indodax opened up for more services and gradually resumed its deposit and withdrawal services as well as staking services.

ZachXBT reported that four stablecoin issuers – including Tether, Circle, Paxos, and Techteryx – have blacklisted two addresses associated with the Lazarus Group, which collectively hold $4.96 million in various stablecoins.

Source: ZachXBT

Aside from the frozen funds on the blacklist, the exchanges have already frozen another $1.65 million belonging to the hackers. This means that the total amount of frozen funds is now about $6.98 million. So far, the ongoing investigation shows a disturbing trend: the stablecoins are being used to launder the stolen funds.

There is evidence that between 2020 and 2023, the Lazarus Group managed to launder around $200 million from various crypto exploits into stablecoins such as USDT and USDC.

Delayed response from Circle

ZachXBT's allegations have sparked a storm of outrage against Circle, particularly its CEO Jeremy Allaire. Critics of the company claim that Circle has shown little concern for the integrity of the crypto ecosystem and that profit seems to be taking up an increasingly large place in the company's vocabulary.

“They pretend to the public that it's a compliant stablecoin that's meant to help protect the ecosystem, but in reality that's not entirely true,” ZachXBT commented, noting that despite its sizeable workforce, Circle does not have an incident response team to handle DeFi hacks or issues caused by exploits.

This criticism comes at a time when discussions about stablecoin regulation and anti-money laundering are intensifying. In the crypto space, people are even more concerned about stablecoins when they are linked to state-sponsored hacker organizations like Lazarus.

The big picture

The Lazarus Group is said to have stolen $3 billion from the digital currency industry in numerous spectacular attacks. The stolen funds could serve as a means for the hacker organization supported by the North Korean regime to develop weapons.

Featured image by Pexels, chart by TradingView