North Korea's Expanding Crypto Theft Tactics Are Taking a Toll on DeFi

Less than three weeks after North Korea-linked hackers breached crypto trading firm Drift using social engineering, another major exploit occurred with Kelp, a restaking protocol connected to LayerZero's cross-chain infrastructure. This attack suggests an evolution in North Korea-linked hackers' tactics, as they now exploit fundamental assumptions in decentralized systems, not just looking for vulnerabilities or stolen credentials. The combined incidents of Drift and Kelp point to an organized effort by North Korea to escalate its crypto sector fund hijacking. According to Alexander Urbelis, chief information security officer and general counsel at ENS Labs, 'This is not a series of incidents; it is a cadence. You cannot patch your way out of a procurement schedule.' More than $500 million was stolen across the Drift and Kelp exploits in just over two weeks. The Kelp breach did not involve breaking encryption but rather manipulating data fed into the system, forcing it to rely on compromised inputs and approve non-existent transactions. As Urbelis noted, 'A signed lie is still a lie. Signatures guarantee authorship; they do not guarantee truth.' This exploit highlights a security failure where the system checked the sender's identity but not the message's accuracy. Experts view this as exploiting the system's setup rather than a new hack. A key issue was Kelp's reliance on a single verifier to approve cross-chain messages, a configuration choice that removed a critical safety layer. In response, LayerZero recommended using multiple independent verifiers, similar to requiring multiple signatures on a bank transfer. However, some argue that LayerZero's default setup was to have a single verifier. The fallout extends beyond Kelp, as its assets are used across multiple platforms, causing problems to spread. 'These assets are a chain of IOUs,' said David Schwed, COO of blockchain security firm SVRN. 'And the chain is only as strong as the controls on each link.' When one link breaks, others are affected, turning a single exploit into a wider stress event. Lending platforms like Aave, which accepted the impacted assets as collateral, are now dealing with losses. The attack also exposes a gap between the marketing of decentralization and its actual operation. 'A single verifier is not decentralized,' Schwed said. 'It's a centralized decentralized verifier.' Urbelis added, 'Decentralization is not a property a system has. It is a series of choices. And the stack is only as strong as its most centralized layer.' In practice, even seemingly decentralized systems can have weak points, especially in less visible layers like data providers or infrastructure. These are increasingly the focus of attackers. The shift in targeting may explain Lazarus' recent focus on cross-chain and restaking infrastructure, which are critical but complex and often hold large amounts of value, making them attractive targets. As Lazarus adapts, the biggest risk may not be unknown vulnerabilities but known ones that are not fully addressed. The Kelp exploit did not introduce a new weakness but showed how exposed the ecosystem remains to familiar ones, especially when security is treated as a recommendation rather than a requirement.