Circle Accused of Profiting from Lazarus Group Transactions

Blockchain analyst ZachXBT has accused Circle of benefiting financially from dealings linked to the infamous North Korean hacking organization, the Lazarus Group. This serious allegation follows a significant delay by Circle in blacklisting funds tied to this group—taking over four months, much longer compared to other leading stablecoin providers.

ZachXBT expressed his frustration publicly, highlighting Circle’s shortcomings in combating money laundering effectively across their platform.

He stated:

“Never have you imposed a blacklist after a DeFi exploit or hack when there was an opportunity, all while you continue to earn from these transactions.”

The Lazarus Group Incident

The Lazarus Group was also linked to a recent cyber attack on the Indonesian cryptocurrency exchange Indodax, which occurred on September 11. This breach led to the theft of over $20 million, forcing the exchange to temporarily suspend operations for a damage assessment.

Forget Circle. Forget Jonas Allaire. Your disdain for the ecosystem shows—it’s clear you’re just extracting profit.

Never have you been quick to blacklist after a DeFi hack, even when time was on your side. Your delay was strikingly longer than others…

— ZachXBT (@zachxbt) September 14, 2024

Following a thorough investigation, Indodax is gradually reintroducing its services, including deposit and withdrawal functionalities along with staking.

ZachXBT revealed that four major stablecoin firms—Tether, Circle, Paxos, and Techteryx—had blacklisted two addresses connected to the Lazarus Group, which contain nearly $4.96 million in assorted stablecoins.

In addition to the blocked blacklisted funds, exchanges have also frozen an extra $1.65 million belonging to the hackers, bringing the total frozen assets to approximately $6.98 million. Current investigations reveal a troubling trend of stablecoins being used to launder stolen assets.

Notably, evidence suggests that the Lazarus Group has successfully laundered around $200 million from various crypto attacks through stablecoins like USDT and USDC between 2020 and 2023.

Circle’s Slow Reaction

ZachXBT’s claims have ignited significant backlash against Circle, particularly targeting CEO Jeremy Allaire. Critics argue that Circle shows little concern for upholding the integrity of the cryptocurrency ecosystem, prioritizing profits instead.

“Publicly they claim to be a compliant stablecoin aimed at safeguarding the ecosystem, but the reality is far from that,” ZachXBT noted. He criticized Circle’s substantial workforce for lacking a dedicated team to address instances of DeFi hacks or related issues.

This criticism arises amid intensifying conversations regarding stablecoin regulations and anti-money laundering measures. Concerns are growing within the crypto community about the implications of stablecoins being associated with state-sponsored hacking groups like Lazarus.

The Broader Context

The Lazarus Group has reportedly pilfered around $3 billion from the cryptocurrency sector through a series of high-profile attacks. These stolen assets may further support the weapon development efforts of the North Korean regime that sponsors this hacking collective.

Image source: Pexels, data graph from TradingView