The US Justice Department’s crypto enforcement team has sharpened its focus on cybercriminals exploiting Decentralized Finance (DeFi), in response to a four-year spike in illegal cryptocurrency activities.
DOJ’s Focus on DeFi and Chain Bridges
Eun Young Choi, director of the US Department of Justice (DOJ) national cryptocurrency enforcement team (NCET), revealed in a Financial Times report published on May 15 that the department is prioritizing the investigation of DeFi-related thefts and hacks, especially those concerning chain bridges. Choi highlighted that the rise of North Korean state-sponsored hackers as key perpetrators in these cybercrimes makes this issue particularly significant for the DOJ.
According to a Cointelegraph report from February, these North Korean hackers are believed to have pilfered crypto assets ranging from $630 million to over $1 billion in 2022. Choi, who was appointed as the inaugural director of the NCET in February 2022, brings almost a decade of DOJ experience to her role.
The DOJ had previously underscored that “mixing and tumbling services” would be the agency’s primary target. However, there was no specific mention of DeFi platforms at that time.
DOJ Targets Crypto Firms Engaging in or Enabling Crime
Speaking at the Financial Times Crypto and Digital Assets Summit, Choi clarified that the DOJ is targeting crypto firms either involved in committing crimes or those enabling crimes, such as money laundering. By focusing on these platforms, the department aims to create a “multiplier effect,” making it harder for criminals to profit from their illicit activities.
Choi also noted a significant increase in the use of digital assets for a variety of illicit activities over the past four years. DeFi platforms, in particular, have been the targets of numerous attacks recently.
Recent Attacks on DeFi Platforms
The most significant DeFi hack this year occurred on March 13 when Euler Finance fell victim to a flash loan attack. Over $196 million in DAI, USDC, staked Ether (StETH), and Wrapped Bitcoin (WBTC) were stolen. Furthermore, in November 2022, the DeFi trading platform Mango Markets was exploited due to its low liquidity, leading to a significant fund drain.
The exploiter deposited $5 million of their own money into the platform, skyrocketing the price of MNGO from $0.03 to $0.91 and inflating their MNGO holdings to $423 million. They then acquired a $116 million loan using various tokens on the platform, including Bitcoin (BTC), Solana (SOL), and Serum (SRM), effectively depleting Mango Markets’ entire liquidity.
