The United States Department of Justice’s (DOJ) crypto tsar is cracking down on Decentralized Finance (DeFi) hackers and exploiters amid a four-year rise in illicit crypto activity.
In a Financial Times report published on May 15, Eun Young Choi, director of the Justice Department’s National Cryptocurrency Enforcement Team (NCET), stated that the department is focusing on thefts and hacks involving DeFi, and “particularly chain bridges.”
Choi said it was a “pretty significant issue” for the DOJ, given North Korean “state-sponsored hackers” have emerged as “key actors in this space.”
North Korean hackers stole between an estimated $630 million to $1 billion of crypto assets in 2022, Cointelegraph reported in February.
The DoJ announced Choi – a prosecutor with nearly a decade of experience in the agency – as the first director of the NCET in February 2022.
At the time, a statement from the department explained that the NCET would serve as a “focal point” for the DOJ in tackling cryptocurrency, cybercrime, money laundering and forfeiture.
Justice Department Announces First Director of National Cryptocurrency Enforcement Teamhttps://t.co/PvJ6iRDQ8P
– Justice Department (@TheJusticeDept) February 17, 2022
While the DOJ highlighted that “mixing and tumbling services” would be a particular focus for the agency, it did not mention anything regarding DeFi platforms at the time.
Choi, who recently spoke at the Financial Times Crypto and Digital Assets Summit, reaffirmed that the DOJ is after crypto firms that either commit the crime or turn a blind eye to “obscure the trail of transactions.” She noted:
“The DOJ is targeting companies that commit crimes themselves or allow them to happen, such as enabling money laundering.”
She explained that going after the source – the platform itself – will have a “multiplier effect” in terms of making it difficult for “criminal actors to easily profit from their crimes.”
Choi further emphasized the “scale and the scope of digital assets being used in a variety of illicit ways” has grown significantly over the last four years.
Related: DeFi sees its biggest hack in 2023 as Euler loses $197M: Finance Redefined
DeFi platforms have experienced a string of attacks in recent times.
Decentralized finance total value locked (TVL). Source: DappRadar
The biggest DeFi hack so far this year was reported on March 13, with Euler Finance facing a flash loan attack with over $196 million in Dai (DAI), USD Coin (USDC), staked Ether (stETH) and Wrapped Bitcoin (WBTC) stolen.
Meanwhile, in November 2022, DeFi trading platform Mango Markets saw an exploiter allegedly take advantage of its low liquidity to “drain funds.”
The hacker deposited $5 million of their own money to the platform, driving up the price of its native Mango (MNGO) token from $0.03 to $0.91 and increasing their MNGO holdings to $423 million.
From there, the exploiter was able to acquire a loan for $116 million using several tokens on the platform, including Bitcoin (BTC), Solana (SOL) and Serum (SRM), which eliminated the entire liquidity of Mango Markets.