US Justice Department has filed a lawsuit to seize the proceeds of blockchain developers from the DPRK

What’s new? The US Justice Department has filed a civil lawsuit to forfeit more than $7,74 million in blockchain developer income linked to the North Korean government. The lawsuit seeks to prevent the DPRK from funding its weapons program through illegal schemes involving IT professionals and cryptocurrency theft.

DOJ press release

What else is known? According to a lawsuit filed in the US District Court for the District of Columbia, North Korean developers circumvented sanctions by getting jobs and amassing millions of dollars in cryptocurrency for the government.

The funds at issue in the lawsuit were originally frozen due to an April 2023 indictment against Sim Hyon Sop, a representative of the North Korean Foreign Trade Bank (FTB), who was in cahoots with the IT workers. Participants in the scheme attempted to launder the illegally obtained $7,74 million, but US authorities managed to seize and freeze it.

As the FBI explained, a large-scale campaign by North Korean IT professionals to defraud US companies through employment using stolen US citizen IDs to circumvent sanctions and generate revenue for the regime has been uncovered.

Blockchain developers from the DPRK work remotely for cryptocurrency around the world, including in China and Russia. To get jobs, they bypass security checks by using fake or fraudulently obtained identification documents. In turn, unsuspecting employers hire members of the scheme and pay them a salary, often in stablecoins such as Circle’s USDC and Tether’s USDT.

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To send illegally obtained cryptocurrency to the DPRK, IT workers used money laundering techniques such as creating accounts with fictitious identities, moving funds in a series of small amounts, moving funds to other blockchains or converting, purchasing NFTs as a means of saving, and hiding illegal funds, using online accounts in the US to legitimize activities, and using cryptocurrency mixers.

After laundering, the funds were sent to the DPRK through Sim Hyon Sop and Kim Sang Man. Kim is a North Korean citizen and the executive director of Chinyong, also known as Jinyong IT Cooperation Company. It reports to the North Korean Ministry of Defense, which the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) added to the sanctions list on June 1, 2017.