The U.S. Department of Justice (DOJ) crypto czar is cracking down on decentralized finance (DeFi) hackers and exploiters amid a four-year rise in illicit crypto activity.
In a report published by the Financial Times on May 15, Eun Young Choi, director of the Ministry of Justice’s National Cryptocurrency Enforcement Team (NCET), said the department is concerned about theft and hacking involving DeFi, “chain bridges in particular.”
Choi said it was a "pretty important issue" for the Justice Department, given that North Korea's "state-sponsored hackers" had become "a key player in the field." As Cointelegraph reported in February, North Korean hackers stole an estimated $630 million to $1 billion in crypto assets in 2022.
The DOJ announced Choi, a prosecutor with nearly a decade of experience at the agency, as NCET's first director in February 2022. At the time, a statement from the department explained that NCET would serve as the DOJ’s “focal point” for dealing with cryptocurrencies, cybercrime, money laundering and forfeiture. While the DOJ emphasized that “mixing and tumbling services” would be a particular focus of the agency, it didn’t mention anything about DeFi platforms at the time. Choi recently spoke at the Financial Times Cryptocurrency and Digital Assets Summit, reiterating that the DOJ is going after cryptocurrency companies that either commit crimes or turn a blind eye to “cover the tracks of their transactions.” She pointed out:
"The Department of Justice targets companies that commit crimes themselves or allow crimes to occur, such as money laundering." Going back to the source the platforms themselves will have a “multiplier effect” that will make it “difficult for criminals to profit from their crimes,” she explained.
Choi further emphasized that the “scale and scope of the use of digital assets in various illicit ways” has grown significantly over the past four years. DeFi platforms have recently experienced a series of attacks. The largest DeFi hack of the year so far occurred on March 13, with Euler Finance facing a flash loan attack holding more than $196 million in Dai, USDT, pledged Ethereum (stETH) and Wrapped Bitcoin (WBTC) were stolen.
Meanwhile, in November 2022, Mango Markets, a DeFi trading platform, discovered that an exploiter was using its low liquidity to “siphon funds”. The hacker deposited $5 million of his own into the platform, driving up the price of its native Mango (MNGO) token from $0.03 to $0.91 and increasing its MNGO holdings to $423 million.
From there, exploiters were able to take out $116 million in loans using multiple tokens on the platform, including Bitcoin, Solana and Serum (SRM), which removes all liquidity from Mango Markets.
