OFAC Sanctions OTC Traders Who Converted Crypto for North Korea’s Lazarus Group

The US Treasury Department has identified over-the-counter (OTC) cryptocurrency traders who helped North Korea’s Lazarus Group convert stolen crypto into fiat currency. Crypto traders in China and Hong Kong have been sanctioned by the Treasury’s Office of Foreign Assets Control (OFAC). In addition, a China-based banker was sanctioned for coordinating some of the illicit cash flow.

Wu Huihui was sanctioned by OFAC for “providing material support to the Lazarus Group,” the North Korean hacking group known for some of the biggest exploits in crypto. According to a statement released by the Ministry of Finance on April 24, Wu, based in China, converted millions of dollars worth of cryptocurrency into fiat currency for North Korean “cyber actors” in several transactions in 2021.

The Chinese government heavily restricts cryptocurrency operations, but OTC transactions are still possible. The Ministry of Finance said in its statement:

“Often, DPRK [Democratic People’s Republic of Korea] actors use […] network of OTC traders, including People’s Republic of China (PRC) based OTC traders, to execute transactions on their behalf to avoid detection by financial institutions or competent authorities.”

Cheng Hung Man, a Hong Kong-based British citizen, was sanctioned for providing material support to Wu. He allegedly helped Wu gain access to the US financial system by using front companies to avoid detection.

Related: North Korea stole more crypto in 2022 than any other year: UN report

Sim Hyon Sop, a North Korean living in China, is a deputy chairman of Korea Kwangson Banking Corp. He was punished for allegedly coordinating financial transfers from traders, including Wu and Cheng, that ultimately ended up supporting North Korea’s weapons of mass destruction and ballistic missile programs.

The Justice Department has also announced that it has opened two indictments against Sim, charging him with conspiring with OTC traders to use stolen funds to purchase goods for North Korea and North Korean IT workers to generate income through illegal work in USA. Federal indictments were returned for Wu, Cheng and Sim on April 18. The Treasury Department noted that the Federal Bureau of Investigation and the South Korean government were involved in the investigation.

Tobacco products and communication devices were also listed as items North Korea obtains with fiat derived from crypto exploits. The Lazarus Group has been linked to the Harmony Bridge hack, the Ronin Bridge hack and other major enterprises.

Magazine: Huawei NFTs, Toyota’s hackathon, North Korea vs Blockchain: Asia Express