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 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 employed by North Korea-linked hackers, who are no longer just looking for vulnerabilities or stolen credentials but are instead exploiting the fundamental assumptions built into decentralized systems. The combined impact of these two incidents points to a more organized effort by North Korea to hijack funds from the crypto 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.' The total amount stolen across the Drift and Kelp exploits exceeds $500 million, accumulated over just 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 thereby approving transactions that never actually occurred. As 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, highlighting that the issue lies in how the system was set up rather than a clever new hack. David Schwed, COO of blockchain security firm SVRN, concurred, stating, 'This attack wasn’t about breaking cryptography; it was about exploiting how the system was set up.' A key issue was the configuration choice made by Kelp to rely 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 incident, LayerZero recommended using multiple independent verifiers to approve transactions, akin to requiring multiple signatures on a bank transfer. However, some have pushed back against this recommendation, 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 fallout from the Kelp exploit has not been contained, as its assets are used across multiple platforms, meaning issues can propagate. Schwed explained, 'These assets are a chain of IOUs. 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. Lending platforms like Aave, which accepted the impacted assets as collateral, are now dealing with losses. The attack also reveals a gap between the marketing of decentralization and its actual implementation. As Schwed pointed out, 'A single verifier is not decentralized; it’s a centralized decentralized verifier.' Urbelis broadened this perspective, 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 that even systems that appear decentralized can have weak points, particularly in less visible layers such as 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. These layers are critical but complex, often underlying more visible applications, and they hold large amounts of value, making them attractive targets. If earlier waves of crypto hacks focused on exchanges or obvious code flaws, recent activity suggests a move towards targeting the industry's underlying infrastructure, 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; it showed how exposed the ecosystem remains to familiar ones, 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 far more expensive to ignore.