North Korea's Cryptocurrency Theft Tactics Are Evolving, with DeFi Being a Prime Target

Less than three weeks after hackers linked to North Korea used social engineering to breach the crypto trading firm Drift, another major exploit was carried out on Kelp, a restaking protocol connected to LayerZero's cross-chain infrastructure. This suggests that North Korea-linked hackers are adapting their methods, now targeting the fundamental assumptions underlying decentralized systems, rather than just seeking out bugs or stolen credentials. The combined incidents of the Drift and Kelp exploits, which together resulted in the theft of over $500 million in just over two weeks, point to a more organized effort by North Korea to divert funds from the crypto sector. 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.' The Kelp breach did not involve breaking encryption or cracking keys; instead, attackers manipulated the data fed into the system, forcing it to rely on compromised inputs and thereby approving transactions that never actually occurred. Urbelis noted, 'The security failure is simple: a signed lie is still a lie. Signatures guarantee authorship; they do not guarantee truth.' This means the system checked who sent the message, not whether the message itself was correct. For security experts, this exploit highlights the issue of exploiting how the system was set up rather than discovering a new hacking technique. David Schwed, COO of blockchain security firm SVRN, stated, 'This attack wasn’t about breaking cryptography; it was about exploiting how the system was set up.' A key issue was a configuration choice where Kelp relied on a single verifier to approve cross-chain messages, a decision made for speed and simplicity but which removes a critical safety layer. Following the incident, LayerZero recommended using multiple independent verifiers to approve transactions, similar to requiring multiple signatures on a bank transfer. However, some in the ecosystem have pushed back on this, arguing that LayerZero’s default setup was to have a single verifier. Schwed emphasized, 'If you’ve identified a configuration as unsafe, don’t ship it as an option. Security that depends on everyone reading the docs and getting it right is not realistic.' The impact of the exploit has not been limited to Kelp, as its assets are used across multiple platforms, leading to a wider stress event. Lending platforms like Aave, which accepted the impacted assets as collateral, are now dealing with losses. The incident also exposes a gap between the marketing of decentralization and its actual implementation. Schwed pointed out, 'A single verifier is not decentralized; 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.' This means that even seemingly decentralized systems can have weak points, especially in less visible layers such as data providers or infrastructure, which are increasingly the focus of attackers. The Lazarus group has begun targeting cross-chain and restaking infrastructure, the parts of crypto that move assets between systems or allow them to be reused. These layers are critical but complex and often hold large amounts of value, making them attractive targets. The shift in targeting may indicate a move toward what could be called the industry’s plumbing, the systems that connect everything together but are harder to monitor and easier to misconfigure. As Lazarus continues to adapt, the biggest risk may not be unknown vulnerabilities but known ones that are not fully addressed. The Kelp exploit did not introduce a new kind of weakness but showed how exposed the ecosystem remains to familiar ones, especially when security is treated as a recommendation rather than a requirement.