Suspected North Korean operatives are allegedly using fake job applications to infiltrate web3 projects, siphoning off millions and raising security concerns.

In the last few years, blockchain and web3 have been at the forefront of technological innovation. However, to paraphrase a quote, with great innovation comes great risk.

Recent revelations have uncovered a sophisticated scheme by operatives suspected to be affiliated with the Democratic People’s Republic of Korea to infiltrate the sector through fake job applications, raising alarms about the security and integrity of the industry.

Economic motives and cyber strategies

North Korea’s economy has been severely crippled by international sanctions, limiting its access to crucial resources, restricting trade opportunities, and hindering its ability to engage in global financial transactions.

In response, the regime has employed various methods to circumvent these sanctions, including illicit shipping practices, smuggling, and tunneling, as well as using front companies and foreign banks to conduct transactions indirectly.

However, one of the DPRK’s most unconventional methods of raising revenue is its reported use of a sophisticated cybercrime warfare program that allegedly conducts cyberattacks on financial institutions, crypto exchanges, and other targets.

The crypto industry has been one of the biggest victims of this rogue state’s alleged cyber operations, with a TRM report from earlier in the year indicating crypto lost at least $600 million to North Korea in 2023 alone.

In total, the report stated that North Korea was responsible for an eye-watering $3 billion worth of crypto stolen since 2017.

Amount of crypto reportedly stolen by North Korea-linked actors between 2017 and 2023 | Source: TRM Labs

With crypto seemingly a soft and lucrative target, reports have emerged of DPRK-linked actors tightening the screw by infiltrating the industry using fake job applications.

Once hired, these operatives are in a better position to steal and siphon off funds to support North Korea’s nuclear weapons program and circumvent the global financial restrictions imposed on it.

The modus operandi: fake job applications

Going by stories in the media and information from government agencies, it seems DPRK operatives have perfected the art of deception, crafting fake identities and resumes to secure remote jobs in crypto and blockchain companies worldwide.

An Axios story from May 2024 highlighted how North Korean IT specialists were gaming American hiring practices to infiltrate the country’s tech space.

Axios said the North Korean agents use forged documents and fake identities, often masking their true locations with VPNs. Additionally, the story claimed that these would-be bad actors primarily target sensitive roles in the blockchain sector, including developers, IT specialists, and security analysts.

300 companies affected by fake remote job application scam

The scale of this deception is vast, with the U.S. Justice Department recently revealing that more than 300 U.S. companies were duped into hiring North Koreans through a massive remote work scam.

These scammers not only filled positions in the blockchain and web3 space but also allegedly attempted to penetrate more secure and sensitive areas, including government agencies.

According to the Justice Department, the North Korean operatives used stolen American identities to pose as domestic technology professionals, with the infiltration generating millions of dollars in revenue for their beleaguered country.

Interestingly, one of the orchestrators of the scheme was an Arizona woman, Christina Marie Chapman, who allegedly facilitated the placement of these workers by creating a network of so-called “laptop farms” in the U.S.

These setups reportedly allowed the job scammers to appear as though they were working within the United States, thereby deceiving numerous businesses, including several Fortune 500 companies.

Notable incidents and investigations

Several high-profile cases have shown how these North Korea-linked agents infiltrated the crypto industry, exploited vulnerabilities, and engaged in fraudulent activities.

Cybersecurity experts like ZachXBT have provided insights into these operations through detailed analyses on social media. Below, we look at a few of them.

Case 1: Light Fury’s $300K transfer

ZachXBT recently spotlighted an incident involving an alleged North Korean IT worker using the alias “Light Fury.” Operating under the fake name Gary Lee, ZachXBT claimed Light Fury transferred over $300,000 from his public Ethereum Name Service (ENS) address, lightfury.eth, to Kim Sang Man, a name which is on the Office of Foreign Assets Control (OFAC) sanctions list.

Light Fury’s digital footprint includes a GitHub account, which shows him as a senior smart contract engineer who has made more than 120 contributions to various projects in 2024 alone.

Case 2: the Munchables hack

The Munchables hack from March 2024 serves as another case study showing the importance of thorough vetting and background checks for key positions in crypto projects.

This incident involved the hiring of four developers, suspected to be the same person from North Korea, who were tasked with creating the project’s smart contracts.

The fake team was linked to the $62.5 million hack of the GameFi project hosted on the Blast layer-2 network.

The operatives, with GitHub usernames such as NelsonMurua913, Werewolves0493, BrightDragon0719, and Super1114, apparently displayed coordinated efforts by recommending each other for jobs, transferring payments to the same exchange deposit addresses, and funding each other’s wallets.

Additionally, ZachXBT said they frequently used similar payment addresses and exchange deposit addresses, which indicated a tightly-knit operation.

The theft happened because Munchables initially used an upgradeable proxy contract that was controlled by the suspected North Koreans who had inveigled themselves into the team, rather than the Munchables contract itself.

This setup provided the infiltrators with significant control over the project’s smart contract. They exploited this control to manipulate the smart contract to assign themselves a balance of 1 million Ethereum.

Although the contract was later upgraded to a more secure version, the storage slots manipulated by the alleged North Korean operatives remained unchanged.

They reportedly waited until enough ETH had been deposited in the contract to make their attack worthwhile. When the time was right, they transferred approximately $62.5 million worth of ETH into their wallets.

Fortunately, the story had a happy ending. After investigations revealed the former developers’ roles in the hack, the rest of the Munchables team engaged them in intense negotiations, following which the bad actors agreed to return the stolen funds.

Case 3: Holy Pengy’s hostile governance attacks

Governance attacks have also been a tactic employed by these fake job applicants. One such alleged perpetrator is Holy Pengy. ZachXBT claims that name is an alias for Alex Chon, an infiltrator allied to the DPRK.

When a community member alerted users about a governance attack on the Indexed Finance treasury, which held $36,000 in DAI and approximately $48,000 in NDX, ZachXBT linked the attack to Chon.

According to the on-chain investigator, Chon, whose GitHub profile features a Pudgy Penguins avatar, regularly changed his username and had been reportedly fired from at least two different positions for suspicious behavior.

In an earlier message to ZachXBT, Chon, under the Pengy alias, described himself as a senior full-stack engineer specializing in frontend and solidity. He claimed he was interested in ZachXBT’s project and wanted to join his team.

An address linked to him was identified as being behind both the Indexed Finance governance attack and an earlier one against Relevant, a web3 news sharing and discussion platform.

Case 4: Suspicious activity in Starlay Finance

In February 2024, Starlay Finance faced a serious security breach impacting its liquidity pool on the Acala Network. This incident led to unauthorized withdrawals, sparking significant concern within the crypto community.

The lending platform attributed the breach to “abnormal behavior” in its liquidity index.

However, following the exploit, a crypto analyst using the X handle @McBiblets, raised concerns regarding the Starlay Finance development team.

As can be seen in the X thread above, McBiblets was particularly concerned with two individuals, “David” and “Kevin.” The analyst uncovered unusual patterns in their activities and contributions to the project’s GitHub.

According to them, David, using the alias Wolfwarrier14, and Kevin, identified as devstar, appeared to share connections with other GitHub accounts like silverstargh and TopDevBeast53.

As such, McBiblets concluded that those similarities, coupled with the Treasury Department’s warnings about DPRK-affiliated workers, suggested the Starley Finance job may have been a coordinated effort by a small group of North Korean linked infiltrators to exploit the crypto project.

Implications for the blockchain and web3 sector

The seeming proliferation of suspected DPRK agents in key jobs poses significant risks to the blockchain and web3 sector. These risks are not just financial but also involve potential data breaches, intellectual property theft, and sabotage.

For instance, operatives could potentially implant malicious code within blockchain projects, compromising the security and functionality of entire networks.

Crypto companies now face the challenge of rebuilding trust and credibility in their hiring processes. The financial implications are also severe, with projects potentially losing millions to fraudulent activities.

Furthermore, the U.S. government has indicated that funds funneled through these operations often end up supporting North Korea’s nuclear ambitions, further complicating the geopolitical landscape.

For that reason, the community must prioritize stringent vetting processes and better security measures to safeguard against such deceptive job-hunting tactics.

It is important for there to be enhanced vigilance and collaboration across the sector to thwart these malicious activities and protect the integrity of the burgeoning blockchain and crypto ecosystem.