The U.S Department Of Justice Shifts Focus To Hunt DeFi Hackers

The United States Department of Justice (DoJ), a crypto tsar, is shifting its focus to hunt for Decentralized Finance (DeFi) hackers and exploiters amid the rise of illicit crypto activities. In a report by Financial Times on May 15, the director of the Justice Department’s National Cryptocurrency Enforcement Team (NCET), Eun Young Choi, stipulated that ‘’the department is focusing on thefts and hacks involving DeFi, and particularly chain bridges.’’

Further, Choi noted that it is a significant issue for the DOJ, given that North Korean state-sponsored hackers have emerged as critical actors in the ecosystem. Choi, a prosecutor with almost a decade of experience in the agency, was revealed in February by the DoJ as the first director of the NCET.

Justice Department Announces First Director of National Cryptocurrency Enforcement Teamhttps://t.co/PvJ6iRDQ8P

— U.S. Department of Justice (@TheJusticeDept) February 17, 2022

However, a statement from the department then noted that the NCET would serve as a focal point for the DoJ. This came as it said that it would tackle cryptocurrency, forfeiture, cybercrime, and money laundering.

Nonetheless, the DoJ asserted that mixing and tumbling services would be the agency’s primary focus. However, it did not give any assertions concerning the DeFi platforms at that time.

Recently, Choi gave her remarks at the Financial Times Crypto and Digital Assets Summit. She reaffirmed that the DoJ is after crypto companies that either commit the crime or turn a blind eye to obscure the trail of transactions. Choi further stipulated:

 The DoJ is focusing on firms that commit crimes themselves or allow them to happen, including enabling money laundering.

The DeFi platform’s struggle with attacks

Choi further noted that going after the platform itself will have a multiplier effect. This is in terms of making it difficult for criminal actors to profit from their crimes quickly. Additionally, she emphasized that the scale and scope of digital assets used in various illicit ways have significantly grown over the past four years.

Notably, the DeFi platforms have experienced a string of attacks. However, the biggest DeFi hack was reported in March this year, with Euler Finance facing a flash loan attack. Over $196 million in DAI, USD Coin, staked Ether ( stETH), and Wrapped Bitcoin (WBTC) were stolen.

The attack was carried out through a flash loan, allowing users to borrow in the millions with zero collateral. However, the money is not free. The loan must be repaid before the transaction is complete, or the smart contract cancels the transaction and treats it as though the loan was never granted.

Nonetheless, in November last year, the DeFi platform Mango Markets saw an exploiter allegedly taking advantage of its low liquidity to ‘’drain funds.’’ Further, 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. Notably,  it increased the MNGO holdings to $423 million.

However, the exploiter acquired a loan for $116 million using several tokens on the platform. This includes Bitcoin (BTC), Solana (SOL), and Serum (SRM) which eliminated the whole liquidity of Mango Markets.

Wrapping up, it is worth noting that as the U.S. Department has commenced the hunt, it is more likely that the number of exploiters and hackers will dwindle.

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