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Eun Young Choi to Head Crypto Enforcement Team to Dismantle Illicit Use

In the wake of a reported increase in cases of illicit transactions using cryptocurrencies like Bitcoin, the U.S. Department of Justice has this week announced the appointment of Eun Young Choi as the first Director of a newly-instituted National Cryptocurrency Enforcement Team (NCET). 

Choi will lead a team tasked with cracking down on illegal activity on crypto exchanges and services like mixing used to launder or hide stolen funds in cryptocurrency. They will work closely with other cross-governmental agencies to identify, investigate, support and pursue cases involving the criminal use of digital assets, the Department states

According to Assistant Attorney General Kenneth A. Polite Jr. of the Criminal Division, the NCET will serve as the focal point for the Justice Department’s efforts to tackle the growth of crime involving digital assets and distributed ledger technologies. He says its formation is necessitated by a rise in the technologies’ “illicit use by criminals who exploit them to fuel cyberattacks and ransomware and extortion schemes; traffic in narcotics, hacking tools and illicit contraband online; commit thefts and scams; and launder the proceeds of their crimes.”

Choi is a veteran of transnational cybercrime and crypto-related investigations . She served in the case of operating as an unlicensed virtual currency exchange and argued the appeal before the Second Circuit in the case against Ross Ulbricht, the Silk Road darknet marketplace founder.

Earlier this month, the Department collected about $3.6 billion worth of Bitcoin which was reportedly stolen during the 2016 hacking of the Bitfinex cryptocurrency exchange from a New York couple. Choi’s appointment is also coming as the 2022 Crypto Crime Report was released by blockchain analytics firm, Chanalysis. The report features 140 pages of data and case studies that analyse cryptocurrency and crime while pointing out that Democratic People’s Republic of Korea (DPRK) hacking activity was on the rise again in 2021. 

At least seven attacks on cryptocurrency platforms were linked to the DPRK in the past year in which almost $400m worth of digital assets was stolen, according to Chainalysis. “From 2020 to 2021, the number of DPRK-linked hacks jumped from four to seven, and the value extracted from these hacks grew by 40%,” it says about the loot which it adds now has less than a quarter in Bitcoin going by its dollar value. “In 2021, only 20% of the stolen funds were Bitcoin, whereas 22% were either ERC-20 tokens or altcoins. And for the first time ever, Ether accounted for a majority of the funds stolen at 58%.” 

Some United Nations experts earlier this month identified the stolen hundreds of millions of dollars in cryptocurrency as an important revenue source for the country’s nuclear and missile programmes. 

The latest Chainalysis crime report cites the growing variety of stolen cryptocurrencies as increasing the complexity of DPRK’s cryptocurrency laundering operation. It also outlined how proceeds from cyberattacks by DPRK tend to be laundered through Asia and likely changed to fiat currencies like China’s RMB.

It explains that the DPRK’s typical laundering process follows ERC-20 tokens and altcoins being swapped for Ether via a  decentralized exchange (DEX) which is then mixed and later swapped for Bitcoin via DEX. The Bitcoin is mixed and consolidated into new wallets and sent to deposit addresses at crypto-to-fiat exchanges based in Asia —potential cash-out points. 

“At the end of this process, the attackers move the Bitcoin to centralized, primarily Asia-based exchanges, where it’s likely swapped for a fiat currency like China’s RMB, allowing them to finally access the cash gained from the hack,” the report states.

Meanwhile, aside from crypto hacks, there are also suggestions that the metaverse including blockchain-based Play to Earn games and other digital assets like non fungible tokens (NFTs) have also been gaining attention for a wrong reason. The Chinese government recently warned citizens on the risk of fraud.

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