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

Barely three weeks after hackers linked to North Korea used social engineering tactics to breach the cryptocurrency trading firm Drift, it appears that another significant exploit has been carried out, this time targeting Kelp, a restaking protocol connected to LayerZero's cross-chain infrastructure. This attack suggests an evolution in the tactics used by North Korea-linked hackers, who are no longer just looking for vulnerabilities or stolen credentials but are instead exploiting fundamental assumptions built into decentralized systems. When considered together, these incidents point to a more organized effort by North Korea to siphon funds from the cryptocurrency sector, rather than a series of isolated breaches. 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 siphoned across the Drift and Kelp exploits in just over two weeks. The Kelp breach did not involve breaking encryption or cracking keys; instead, attackers manipulated the data feeding into the system, forcing it to rely on compromised inputs and thus approving transactions that never actually occurred. 'The security failure is simple: a signed lie is still a lie,' Urbelis noted. 'Signatures guarantee authorship; they do not guarantee truth.' In simpler terms, 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 hack. 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 choice made for speed and simplicity but one that removes a critical safety layer. In the aftermath, LayerZero has recommended using multiple independent verifiers to approve transactions, much like requiring multiple signatures on a bank transfer. However, some have pushed back on this, noting 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 has not been limited to Kelp, as its assets are used across multiple platforms, leading to a wider stress event. 'These assets are a chain of IOUs,' Schwed explained. 'And the chain is only as strong as the controls on each link.' When one link breaks, others are affected, with lending platforms like Aave that accepted the impacted assets as collateral now dealing with losses. This exploit also exposes a gap between the marketing of decentralization and its actual implementation. 'A single verifier is not decentralized,' Schwed said. 'It’s a centralized decentralized verifier.' Urbelis broadened this point, stating, '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, this means even seemingly decentralized systems can have weak points, especially in less visible layers like data providers or infrastructure, which are increasingly the focus of attackers. The recent targeting by Lazarus, a group linked to North Korea, of cross-chain and restaking infrastructure, underscores this shift. Urbelis noted that Lazarus has begun focusing on these critical but complex layers that move assets between systems or allow them to be reused, layers that hold large amounts of value and are 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 kind of weakness; instead, it showed how exposed the ecosystem remains to familiar vulnerabilities, especially when security is treated as a recommendation rather than a requirement. As attackers move faster, this gap is becoming both easier to exploit and far more expensive to ignore.