U.S. Seizes $7.74 Million in Cryptocurrency Linked to North Korean Laundering Scheme

The U.S. Department of Justice has initiated a civil forfeiture lawsuit targeting over $7.74 million in cryptocurrency assets. This legal action is part of an extensive investigation into a scheme orchestrated by the North Korean government, where individuals posing as IT workers were employed remotely, received payments, and laundered the proceeds through stablecoins before sending them back to North Korea. The operation was coordinated by Sim Hyon Sop, a representative of the North Korea Foreign Trade Bank, and is currently under investigation by the FBI.

The frozen funds are connected to an indictment from April 2023 against Sim Hyon Sop, who is accused of collaborating with North Korean IT professionals to launder proceeds through various tactics. The seized funds are part of a broader effort by the North Korean government to exploit the global cryptocurrency infrastructure to generate revenue despite international sanctions.

The North Korean IT workers, operating under the direction of their government, have been deployed across various jurisdictions. They have been instructed to find employment in the blockchain and tech sectors, using stolen or forged documents to bypass know-your-customer (KYC) and due diligence procedures. Their work, often compensated in stablecoins such as USDC or USDT, generated income that was eventually laundered and routed back to North Korea.

To obscure the origin of the funds, the workers allegedly employed a variety of laundering techniques. These included opening accounts with fake identities, executing multiple small transfers, switching between blockchains, converting assets into different cryptocurrencies, and even purchasing non-fungible tokens (NFTs) as stores of value. The proceeds were moved through online U.S.-based platforms and commingled to avoid detection before being transmitted to North Korean entities through intermediaries such as Sim and Kim Sang Man.

Kim Sang Man, named in the DOJ filing, is alleged to be the CEO of Chinyong, which operates under North Korea’s Ministry of Defense. Chinyong is sanctioned by the U.S. Treasury Department and is reported to manage delegations of North Korean IT workers in various countries. Kim’s role allegedly involved transmitting funds from the IT workers to Sim, thereby completing the cycle of crypto laundering back to the North Korean government.

This case highlights a broader strategic focus by U.S. agencies to disrupt illicit financing networks. Officials emphasized that targeting North Korea’s digital revenue streams is essential to enforcing sanctions and limiting funds available for military development. U.S. businesses were also advised to review remote hiring practices to detect potential obfuscation tactics that may be used by foreign actors.

The DOJ’s action underscores the increasing sophistication of North Korea’s efforts to evade international sanctions through the use of cryptocurrency. By exploiting the decentralized and often anonymous nature of digital currencies, North Korean IT workers have been able to generate significant revenue for their government. However, the DOJ’s civil forfeiture lawsuit represents a significant blow to these efforts, demonstrating the U.S. government’s commitment to enforcing sanctions and combating illicit financial activities.