US Justice Department hunts DeFi hackers and thieves

Following a period of bullish price movement, the total value locked in DeFi protocols has fallen below $50 billion. This decline has caught the attention of Eun Young Choi, the director of the National Cryptocurrency Enforcement Team (NCET) at the U.S. Department of Justice (DOJ), who considers it a significant issue. Choi is particularly concerned about the involvement of North Korean state-sponsored hackers in the rise of illicit crypto activities.

In 2022, North Korean hackers were claimed to have stolen between $630 million and $1 billion in cryptocurrency. In response to the growing threat, the Department of Justice appointed Choi as the director of the NCET in February 2022, with a focus on countering crypto-related crimes, cybercrime, money laundering, and asset forfeiture. While the agency initially emphasized its attention to “mixing and tumbling services,” it did not specifically mention DeFi platforms.

During the Financial Times Crypto and Digital Assets Summit, Choi reiterated the DOJ’s pursuit of crypto firms involved in criminal activities or complicit in obscuring transaction trails to enable money laundering. By targeting the platforms themselves, Choi believes the DOJ can make it more difficult for criminals to profit from their illicit actions. She emphasized the significant growth in the scale and scope of digital assets being misused over the past four years.

Recent times have seen a series of attacks on DeFi protocols. One notable incident occurred on March 13, when Euler Finance experienced a flash loan attack resulting in the theft of over $196 million worth of various cryptocurrencies. Another case took place in November 2022, where an exploiter took advantage of low liquidity on the DeFi trading platform Mango Markets. By depositing $5 million and manipulating the price of the platform’s native token, the hacker acquired a loan worth $116 million, ultimately draining all liquidity from Mango Markets.

The Department of Justice’s intensified focus on DeFi hacks and exploits reflects their recognition of the growing threat posed by state-sponsored hackers like those from North Korea. By targeting both the perpetrators and the platforms that facilitate illicit activities, the DOJ aims to disrupt and deter criminal actors, making it harder for them to profit from their crimes.