Leading cryptocurrency company Circle is under public scrutiny after on-chain “investigator” ZachXBT, known for his contribution to the exposure of numerous blockchain scams, criticized its delayed response to blacklisting funds linked to Lazarus Group, the notorious hacking group.
The notorious criminal group has laundered over $200 million from crypto hacks between 2020 and 2023.
In a statement posted on X (formerly Twitter) over the weekend, ZachXBT reported that nearly $5 million linked to the Lazarus Group was frozen by four stablecoin issuers in late April and mid-September.
Specifically, Tether, Paxos, and Techteryx blacklisted two addresses linked to the group in late April. Circle was particularly slow, taking over four months longer to act, which ZachXBT claimed was a sluggish response compared to its peers.
Update: As of today all four stablecoin issuers (Paxos, Tether, Techteryx, Circle) have now blacklisted the two addresses below with $4.96M from Lazarus Group.
0x36f2D3871edd59d5C06DB8F0b12bE928d5922A70
0x12ED7f6ed0491678764c2b222A58452926E44DB6Another $1.65M is frozen at… pic.twitter.com/dZSOltDRy4
— ZachXBT (@zachxbt) September 14, 2024
Scams Abound
The crypto sleuth accused Circle and its CEO Jeremy Allaire of prioritizing profit over the integrity of the system and of engaging in deceptive practices to maintain a positive public image.
“You do not care at all about the ecosystem except extracting from it,” ZachXBT claimed. “Not once have you ever blacklisted after a DeFi exploit / hack when there was ample time while you continue to profit off the transactions… So tired of your virtue signaling when you are the problem.”
ZachXBT has been investigating the Lazarus Group’s money laundering activities since April. He revealed that they have laundered over $200 million from 25 crypto-related hacks between 2020 and 2023. So far around $6.9 million was frozen from these investigations.
The Lazarus Group has been involved in numerous crypto hacks that primarily target decentralized finance (DeFi) projects. Some of its notorious cases are the $625 million hack of the Ronin Network and thefts from other platforms like Poly Network and CoinEx.
The group has been said to be designated as an advanced persistent threat due to its sophisticated hacking operations aimed at generating revenue and disrupting foreign entities.
Massive Illegal Gains
According to the U.S. Department of Justice, the proceeds from these cybercrimes are used to circumvent international sanctions and fund North Korea’s military initiatives, including its weapons program.
In addition, North Korea produces loads of drugs, and participates in human trafficking.
Many cryptocurrency companies are collaborating with law enforcement agencies like the FBI to trace and recover stolen funds. As part of a broad effort to prevent the laundering of stolen assets through stablecoins, major stablecoin issuers have taken steps to blacklist addresses associated with the Lazarus Group.
Given the proactive measures put in place to enhance the security, Circle’s delayed action has put its commitment to the crypto ecosystem in doubt.
ZachXBT’s claim came shortly after Circle announced its relocation of headquarters from Boston to New York City, said CEO Jeremy Allaire in a social statement.
Allaire stated that the move is part of the company’s strategy to strengthen its presence in the financial capital of the U.S, particularly as the company progresses towards an initial public offering (IPO).
Circle is set to establish its new global headquarters at One World Trade Center, the heart of Wall Street. Allaire noted that despite concerns about regulatory hostility towards the crypto industry, he believes the U.S. is on the brink of becoming a leader in the global crypto revolution.
The company is ramping up efforts for its IPO plans. After an original failed attempt in 2022 due to legal challenges and market setback, Circle confidentially filed for an IPO earlier this year and aims to become the first stablecoin company to go public.
USDC, its flagship product, is currently the second-largest stablecoin, with a market cap of approximately $34 billion. A successful IPO could help it bridge the gap with Tether (USDT), the leading stablecoin with a market cap of around $118 billion.