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 significant exploit has been carried out against Kelp, a restaking protocol connected to LayerZero's cross-chain infrastructure. This attack indicates an evolution in the tactics of North Korea-linked hackers, who are now exploiting fundamental assumptions built into decentralized systems, rather than just seeking out bugs or stolen credentials. The combined incidents of Drift and Kelp suggest a more organized effort by North Korea to intercept funds from the cryptocurrency 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.' More than $500 million was siphoned off in just over two weeks across these two exploits. 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 approve transactions that never actually occurred. This exploit highlights a simple security failure: 'A signed lie is still a lie,' Urbelis noted. 'Signatures guarantee authorship; they do not guarantee truth.' In essence, the system verified who sent the message but not whether the message itself was correct. Security experts view this as exploiting how the system was set up rather than a sophisticated new hack. David Schwed, COO of blockchain security firm SVRN, emphasized, 'This attack wasn’t about breaking cryptography; it was about exploiting how the system was set up.' A key issue was a configuration choice: Kelp relied on a single verifier to approve cross-chain messages, which is faster and simpler but removes a critical safety layer. Following the incident, LayerZero has recommended using multiple independent verifiers to approve transactions, akin to requiring multiple signatures on a bank transfer. However, some have pushed back on this, stating that LayerZero's default setup was to have a single verifier. Schwed argued, '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 exploit has spread beyond Kelp, affecting lending platforms like Aave that accepted the impacted assets as collateral, turning a single exploit into a broader stress event. The incident also exposes a gap between the marketing of decentralization and its actual implementation. 'A single verifier is not decentralized; it’s a centralized decentralized verifier,' Schwed said. 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, particularly 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. These layers are critical but complex and often hold large amounts of value, making them 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 but showed how exposed the ecosystem remains to familiar ones, 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 more expensive to ignore.