North Korea's Expanding Crypto Theft Tactics are Targeting DeFi

Less than three weeks after North Korea-linked hackers used social engineering to breach crypto trading firm Drift, another major exploit occurred with Kelp, a restaking protocol connected to LayerZero's cross-chain infrastructure. This attack suggests that North Korea-linked hackers are evolving their tactics, now exploiting fundamental assumptions in decentralized systems rather than just seeking bugs or stolen credentials. The combined incidents of Drift and Kelp point to a more organized effort by North Korea to hijack crypto sector funds. 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 exploit did not involve breaking encryption but rather manipulating data fed into the system, forcing it to rely on compromised inputs and approve transactions that never occurred. 'The security failure is simple: a signed lie is still a lie,' Urbelis said. 'Signatures guarantee authorship; they do not guarantee truth.' This highlights that the system checked the sender of the message, not the message's correctness. For security experts, this exploit is less about a new hack and more about exploiting the system's setup. David Schwed, COO of blockchain security firm SVRN, noted, 'This attack wasn’t about breaking cryptography. It was about exploiting how the system was set up.' A key issue was Kelp's reliance on a single verifier to approve cross-chain messages, which, although faster and simpler to set up, removes a critical safety layer. In response, LayerZero has recommended using multiple independent verifiers, akin to requiring multiple signatures on a bank transfer. However, some argue that LayerZero’s default setup was to have a single verifier. The fallout has extended beyond Kelp, affecting lending platforms like Aave that accepted impacted assets as collateral, turning a single exploit into a wider stress event. The attack also reveals 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 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 even seemingly decentralized systems can have weak points, especially in less visible layers. The recent targeting by Lazarus, a group linked to North Korea, has shifted towards cross-chain and restaking infrastructure, critical but complex layers that move assets between systems or allow them to be reused. These layers are attractive targets due to their large value holdings. The biggest risk may not be unknown vulnerabilities but known ones that are not fully addressed, as seen in the Kelp exploit, which 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.