North Korea's Cryptocurrency Hacking Tactics Are Evolving, with DeFi Being a Prime Target

Less than three weeks after North Korea-linked hackers employed social engineering tactics to breach the crypto trading firm Drift, hackers with ties to the nation appear to have orchestrated 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, who are no longer just exploiting bugs or using stolen credentials but are now manipulating the foundational assumptions built into decentralized systems. The cumulative effect of these two incidents points to a more organized effort than a series of isolated hacks, as North Korea continues to escalate its attempts 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.' More than $500 million was siphoned off across the Drift and Kelp exploits in just over 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 approve transactions that never actually occurred. 'The security failure is simple: a signed lie is still a lie,' Urbelis noted. 'Signatures guarantee authorship; they do not guarantee truth.' In simpler terms, the system checked who sent the message, not whether the message itself was correct. For security experts, this exploit highlights the exploitation of how the system was set up rather than a clever new hack. David Schwed, COO of blockchain security firm SVRN, stated, '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, which, although faster and simpler to set up, removes a critical safety layer. In the aftermath, LayerZero recommended using multiple independent verifiers to approve transactions, akin to requiring multiple signatures on a bank transfer. However, some in the ecosystem have pushed back against this framing, 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 exploit has not been limited to Kelp, as its assets are used across multiple platforms, leading to a wider stress event. 'These assets are a chain of IOUs,' Schwed explained. 'And the chain is only as strong as the controls on each link.' When one link breaks, others are affected, with lending platforms like Aave that accepted the impacted assets as collateral now dealing with losses. The attack also exposes 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 framed it more broadly, 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.' In practice, this means even systems that appear decentralized 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 the recent targeting by Lazarus, a group that has begun focusing on cross-chain and restaking infrastructure, the parts of crypto that move assets between systems or allow them to be reused. These layers are critical but complex, often sitting underneath more visible applications, and tend to hold large amounts of value, making them attractive targets. 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 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 far more expensive to ignore.