North Korea's Cryptocurrency Theft Strategy Expands, Targeting DeFi

Less than three weeks after North Korea-linked hackers used social engineering to breach the crypto trading firm Drift, hackers with ties to the nation appear to have carried out another significant exploit, this time targeting Kelp, a restaking protocol connected to LayerZero's cross-chain infrastructure. This attack suggests an evolution in the tactics of North Korea-linked hackers, as they now exploit not just bugs or stolen credentials, but the fundamental assumptions underlying decentralized systems. 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 hijack 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 exploit 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 approve transactions that did not actually occur. 'The security failure is simple: a signed lie is still a lie,' Urbelis explained. 'Signatures guarantee authorship; they do not guarantee truth.' In simpler terms, the system verified who sent the message, not whether the message itself was accurate. For security experts, this exploit highlights the exploitation of how the system was set up rather than the discovery of a new hack. 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 a configuration choice, with Kelp relying on a single verifier to approve cross-chain messages, a decision made for speed and simplicity but one that removes a critical safety layer. Following the exploit, LayerZero recommended using multiple independent verifiers to approve transactions, akin to requiring multiple signatures on a bank transfer. However, some in the ecosystem pushed back on this recommendation, stating 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 fallout from the Kelp exploit has not been contained, as assets used across multiple platforms can spread problems. 'These assets are a chain of IOUs,' Schwed said. '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, such as lending platforms like Aave dealing with losses after accepting impacted assets as collateral. 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 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.' 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. This shift may explain why Lazarus, a North Korea-linked hacking group, has recently targeted cross-chain and restaking infrastructure, parts of the crypto ecosystem that move assets between systems or allow them to be reused. These layers are critical, complex, and often hold large amounts of value, making them attractive targets. If earlier crypto hacks focused on exchanges or obvious code flaws, recent activity suggests a move toward targeting the industry’s underlying infrastructure, the systems that connect everything together but are harder to monitor and easier to misconfigure. 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; it showed how exposed the ecosystem remains to familiar vulnerabilities, especially when security is treated as a recommendation rather than a requirement. And as attackers move faster, this gap is becoming both easier to exploit and more expensive to ignore.