North Korean Foreign Trade Bank Representative Charged with Crypto-Laundering Conspiracies | OPA
Two federal indictments were unsealed today in the District of Columbia charging a representative of the North Korean Foreign Trade Bank (FTB) with his role in separate money laundering conspiracies designed to generate revenue for the Democratic People’s Republic of Korea through the use of cryptocurrency.
“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,” said Assistant Attorney General Kenneth A. Polite, Jr. from the Ministry of Justice’s Criminal Division. “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.”
According to court documents, Sim Hyon Sop (Sim), 39, is charged with conspiring with over-the-counter (OTC) cryptocurrency traders to use stolen funds to purchase goods for North Korea and conspiring with North Korean IT workers to generate income through illegal employment with blockchain development companies in the United States.
The first indictment involves a conspiracy between Sim and three OTC traders to launder funds stolen from virtual currency exchange hacks to make payments in US dollars for goods on behalf of the North Korean government. The second involves a conspiracy between Sim and various North Korean IT workers to launder the proceeds of illegal IT development work, where the IT workers obtained employment with US blockchain development companies using false identities, and then laundered their ill-gotten gains through Sim to benefit by the North Korean regime, and in violation of sanctions imposed on North Korea by the Department of Treasury’s Office of Foreign Assets Control (OFAC) and the United Nations. These sanctions were imposed to impede North Korea’s ballistic missile development, weapons production, and research and development programs.
“Today’s indictment exposes North Korea’s continued use of various means to circumvent U.S. sanctions,” said United States Attorney Matthew M. Graves for the District of Columbia. “We can and will ‘follow the money’, be it through cryptocurrency or the traditional banking system, to bring appropriate charges against those who would help finance this corrupt regime.”
According to court documents, North Korean national Sim, Chinese national Wu Huihu (Wu), Hong Kong British National (overseas) Cheng Hung Man (Cheng), and the user of the online moniker live:jammychen0150 (“Jammy Chen”) conspired to launder stolen cryptocurrency and then used those funds to purchase goods through Hong Kong-based front companies on behalf of North Korea. Sim routed these payments, which were made in US dollars, through “Jammy Chen”. “Jammy Chen” then recruited Wu and Cheng, who were both OTC traders, to find fake front companies and facilitate the payments to avoid US sanctions against North Korea.
Sim also allegedly conspired to launder funds generated by North Korean IT workers who obtained illegal employment in the technology and crypto industries. These IT workers used fake personas to get jobs, including jobs at US-based companies, and then asked to be paid in cryptocurrencies, such as stablecoins such as USD Tether (USDT) and USD Coin (USDC), which are linked to American dollar. . After receiving payment, they routed the proceeds back to North Korea through Sim.
According to court documents, the Reconnaissance General Bureau (RGB) is North Korea’s primary intelligence and covert operations unit, known to have a cyber capability that has become known within the cybersecurity community as both the Lazarus Group and Advanced Persistent Threat 38 (APT38). APT38 is a financially motivated North Korean regime-backed group responsible for conducting destructive cyber attacks since at least 2014 to generate revenue for its ballistic missile and WMD programs. Specifically, these North Korean hackers have worked together to carry out cyber attacks against victims in the United States and around the world, including hacks against financial institutions and virtual asset service providers. North Korean actors have gained unauthorized access to these victim networks as part of their fraudulent schemes in a variety of ways, including through spear-phishing messages designed to trick victims into downloading and executing malware developed by the hackers.
Since 2017, as part of its cyber campaign, North Korean hackers have also carried out virtual currency-related thefts to generate revenue for the regime, including through hacking virtual asset service providers, such as virtual currency exchanges. A portion of the proceeds from these virtual currency theft and fraud schemes were sent to virtual currency address 1G3Qj4Y4trA8S64zHFsaD5GtiSwX19qwFv, which Sim and his OTC dealers used to finance payments for goods for North Korea.
To generate revenue for the regime, North Korea also deploys IT workers to provide illegal work in the cryptocurrency industry. According to court documents, North Koreans are applying for jobs in remote IT development work without disclosing that they are North Korean. These IT workers bypass security and due diligence checks through false or fraudulent use of identity documents and other obfuscation strategies, such as virtual private networks to hide their true location from payment processors and employment platforms. The IT workers request payment for their services in virtual currency and then send the proceeds back to North Korea via, among others, FTB representatives such as Sim.
A third indictment also unsealed today in the District of Columbia separately charges Wu with operating an unlicensed money transmission business. According to court documents, Wu operated as an OTC trader on a US-based virtual currency exchange and executed over 1,500 trades for US clients without obtaining the necessary licenses.
The FBI Chicago Field Office and the FBI’s Virtual Assets Unit (VAU) are investigating the cases.
The charge of conspiring to launder monetary instruments is punishable by a maximum of 20 years in prison. The charge of operating an unlicensed money transfer business is punishable by a maximum of five years in prison.
Trial Attorney Jessica Peck of the Justice Department’s National Cryptocurrency Enforcement Division (NCET) and Computer Crime and Intellectual Property Section, Assistant U.S. Attorneys Steven Wasserman and Christopher Tortorice for the District of Columbia, and Trial Attorney Emma Ellenrieder of the National Security Division’s Counterintelligence and Export Control Section are prosecuting the cases. Paralegal Specialists Brian Rickers and Angela De Falco and Legal Assistant Jessica McCormick provided valuable assistance. Significant assistance was also provided by the United States Attorney’s Office for the Central District of California, the FBI Los Angeles Field Office, the Criminal Division’s Money Laundering and Asset Recovery Section, former Special Agent Chris Janczewski of the IRS Criminal Investigation, and former FBI Analyst Nick Carlsen.
NCET was established in October 2021 to combat the growing illicit use of cryptocurrencies and digital assets. Under the supervision of the Criminal Division, NCET conducts and supports investigations into individuals and entities that enable the use of digital assets to commit and facilitate a range of crimes, with a particular focus on virtual currency exchange, mixing and tumbling services and infrastructure providers. NCET also sets strategic priorities regarding digital asset technologies, identifies areas for increased investigative and prosecutorial focus, and leads the department’s efforts to partner with domestic and foreign government agencies as well as the private sector to aggressively investigate and prosecute crimes involving cryptocurrency and digital assets .
An indictment is only an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
