US DOJ Increases Focus on Crypto: Takes Aim at Crypto Exchanges and DeFi Hackers

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Key takeaways:

  • The DoJ is after cryptocurrency exchanges that make it simple for criminals to cash in on their crimes and benefit.
  • NCET claimed that attacking the platform directly will have a “multiplier effect, ” making it more challenging for criminal actors to profit quickly from their crimes.

In response to a four-year increase in illegal cryptocurrency activities, the US Department of Justice’s (DOJ) crypto tsar is taking action against hackers and exploiters of Decentralised Finance (DeFi).

Eun Young Choi, the National Cryptocurrency Enforcement Team’s (NCET) chief, revealed in a Financial Times article that the department concentrates on thefts and breaches involving DeFi, “particularly chain bridges.” In light of the fact that North Korean state-sponsored hackers had become “key actors in this space,” Choi said it was a “pretty significant issue” for the DOJ.

Choi, a prosecutor with almost ten years of agency experience, was named the first director of the NCET by the DoJ in February 2022. The NCET would act as a “focal point” for the DOJ in addressing cryptocurrencies, cybercrime, money laundering, and forfeiture, according to a statement from the department at the time.

Although the DOJ stated that “mixing and tumbling services” would be a specific focus for the organization, DeFi platforms were not mentioned then. Choi reiterated that the DOJ is seeking cryptocurrency companies that either commit the crime or ignore it to “obscure the trail of transactions.” She observed:

“The DOJ is targeting companies that commit crimes themselves or allow them to happen, such as enabling money laundering.”

In her explanation, she claimed that attacking the platform directly will have a “multiplier effect” that will make it more challenging for “criminal actors to easily profit from their crimes.” Choi added that over the last four years, the scale and the scope of digital assets used in various illicit ways had increased substantially.

On March 13, it was revealed that Euler Finance had been the target of the most significant DeFi breach so far this year, which resulted in the theft of over $196 million in Dai, USD Coin, staked Ether (stETH), and wrapped Bitcoin (WBTC).

Mango Markets, a DeFi trading platform, purportedly witnessed an exploiter in November 2022 use its limited liquidity to “drain funds.” By contributing $5 million of their own funds to the platform, the hacker increased their MNGO holdings to $423 million and increased the value of the network’s native Mango (MNGO) token from $0.03 to $0.91. 

From then, the exploiter obtained a loan for $116 million using a variety of platform tokens, including Bitcoin, Solana, and Serum (SRM), which completely erased Mango Markets’ liquidity.

The government reported busting six of these scams for about $112 million last month. According to estimates from the Federal Bureau of Investigation (FBI), investment fraud would cost consumers $3.31 billion in 2022, with over $2.5 billion of that amount coming from scams involving cryptocurrencies.

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