North Korea's Crypto 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, this time on Kelp, has occurred. Kelp, a restaking protocol connected to LayerZero's cross-chain infrastructure, demonstrates an evolution in North Korea-linked hackers' methods, now exploiting fundamental assumptions in decentralized systems, not just looking for bugs or stolen credentials. The combined incidents suggest 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 stolen across the Drift and Kelp exploits in over two weeks. The Kelp breach did not involve breaking encryption but rather manipulating data inputs, forcing the system to rely on compromised information and approve non-existent transactions. 'The security failure is simple: a signed lie is still a lie,' Urbelis said, highlighting that signatures guarantee authorship, not truth. The system checked the sender's identity, not the message's correctness. This exploit was about manipulating the system's setup rather than breaking cryptography. A key issue was Kelp's reliance on a single verifier for cross-chain messages, a configuration choice that, while faster and simpler, removes a critical safety layer. LayerZero has since 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 extends beyond Kelp, affecting lending platforms like Aave that accepted impacted assets as collateral, turning a single exploit into a wider stress event. This incident also exposes the gap between decentralization marketing and reality. 'A single verifier is not decentralized,' said David Schwed, COO of blockchain security firm SVRN. 'It’s a centralized decentralized verifier.' The attack highlights that 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 shift in targeting cross-chain and restaking infrastructure may explain Lazarus' recent actions, focusing on the industry's 'plumbing'—the systems connecting everything and holding large amounts of value. As Lazarus adapts, the biggest risk may not be unknown vulnerabilities but known ones not fully addressed. The Kelp exploit showed how exposed the ecosystem remains to familiar weaknesses, especially when security is treated as a recommendation rather than a requirement.