Crypto Exchange Bug Reveals North Korean Monero Laundering

Bank Info Security ^ | September 29, 2021 | Jeremy Kirk

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Crypto Exchange Bug Reveals North Korean Monero Laundering

ShapeShift's Systems Reduced Privacy for Monero, Researcher Says

Jeremy Kirk (jeremy_kirk) • September 29, 2021

Weaknesses in the systems of ShapeShift, a U.K.-based cryptocurrency exchange, reveal how a North Korean-linked group laundered cryptocurrency that came from a notorious ransomware attack in 2017.

See Also: Automating Security Operations

The issues also put at risk the privacy of some other users of Monero, a cryptocurrency designed to provide a high degree of privacy, who transacted on ShapeShift.

The bug appears to have been discovered by multiple parties, including Nick Bax, who recently received a doctoral degree from Stanford University School of Medicine and is an independent analyst who studies blockchain and cryptocurrencies. He published a blog post about the bug on Tuesday.

Bax's analysis "is a good real-world example of flaws in Monero that have been understood, theoretically, for a long time," says Ian Miers, an assistant computer science professor at the University of Maryland and a cofounder of Zcash, a privacy-focused digital currency.

Miers says the research highlights broader security issues with Monero, and ones that are not unique to ShapeShift. "You can play connect the dots with some Monero transactions if you have data from exchanges. And Monero was supposed to protect you even if that data was known," he says.

The issues in ShapeShift's systems have been known for a number of years, says Justin Ehrenhofer, the host of Breaking Monero, a video series focused on Monero. But it shouldn’t reflect on Monero's current privacy state, which has improved since 2017, Ehrenhofer says.

Also, Ehrenhofer says that the Lazarus group made some notable and revealing moves, including sending large amounts of Monero around at a time when those transactions would have been unusual.