North Korean bank official charged with crypto-laundering conspiracies

Tether claims its dollar-pegged token is “fully supported”.

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On Monday, a Washington, DC, district court unsealed two federal indictments charging a North Korean bank official with his alleged role in cryptocurrency laundering conspiracies.

The first indictment charges Sim Hyon Sop (Sim), a representative of the North Korean Foreign Trade Bank (FTB), with allegedly laundering funds “stolen from virtual asset service providers”, transferring the funds to US dollars and using them to purchase goods, together with a group of over-the-counter crypto traders, according to the court document. The alleged actions are in violation of current sanctions against North Korea from both the United States and the United Nations.

The newly unsealed indictments represent a broader pattern in recent years of North Korean workers using virtual private networks (VPNs) and other tools to illegally obtain remote employment and divert income to North Korea.

Operatives working on behalf of the country have also orchestrated other crypto-focused hacks in recent years, making off with an estimated $1.7 billion in crypto by 2022, according to a release from the US Treasury Department. And in late 2017, hackers in North Korea gained access to approximately $75 million in virtual currency via a phishing campaign, according to the first indictment.

Sim, as part of the second indictment, was charged with conspiring with a group of North Korean IT workers to launder about $12 million in illegally earned wages from IT development work in the United States. The workers allegedly assumed false identities to get jobs at blockchain development firms based in the US and abroad between 2021 and March 2023.

The IT workers requested that their wages be paid in cryptocurrency — such as stablecoins such as USD Tether and USD Coin — via US-based crypto exchanges, according to the indictment and a release from the US Department of Justice. They then allegedly worked with Sim to launder the proceeds and divert them to North Korea, in part to “generate revenue for North Korea’s ballistic missile and WMD programs,” according to the indictment.

Almost every month so far this year, North Korea has conducted tests of its intercontinental ballistic missiles, the most recent of which took place in mid-April.

While the FBI continues to investigate the crypto-laundering cases, the money laundering charges are punishable by a maximum of 20 years in prison, according to the DOJ release. Sim and other defendants are unlikely to face trial, as they were reportedly based in China and Hong Kong when the alleged crimes occurred, and the US has no existing extradition treaty with China.

“The charges announced today respond to innovative efforts by North Korean operators to evade sanctions by exploiting the technological capabilities of virtual assets to facilitate payments and profits, and target virtual currency companies for theft,” Kenneth A. Polite, Jr., assistant attorney general. in the DOJ’s criminal division, said in a release. “We will continue to work to disrupt and deter North Korean actors and those who help them by following the money on the blockchain and shedding light on their behavior.”