Circle, the issuer of USDC, has come under fire following allegations made by blockchain investigator ZachXBT regarding the company’s involvement in transactions connected to the North Korean hacker group Lazarus. Known for his Web3 investigative work, ZachXBT publicly criticized Circle and its CEO Jeremy Allaire for reportedly benefiting from activities linked to Lazarus due to delayed blacklisting of wallets engaged in illicit actions. This delayed action by Circle in contrast to other major stablecoin issuers sparked frustration as ZachXBT pointed out the company’s failure to prevent money laundering on its platform.
ZachXBT pointed out that Circle took 4.5 months longer than other issuers to blacklist funds associated with the Lazarus Group, emphasizing the group’s involvement in a recent hack on the Indonesian crypto exchange Indodax where over $20 million was stolen, leading to the exchange’s temporary shutdown for damage assessment.
While Tether and other stablecoin issuers had blacklisted two wallet addresses linked to Lazarus Group, Circle faced criticism for purportedly not taking timely action against them. These actions by stablecoin issuers have frozen a substantial amount—$6.98 million—from the hackers’ wallets, spanning various stablecoins such as USDT, USDC, BUSD, and TUSD. Additionally, ongoing investigations have led crypto exchanges to freeze $1.65 million associated with the hackers.
The past activities of the Lazarus Group in laundering approximately $200 million through stablecoins between 2020 and 2023 as reported by ZachXBT underscore the need for vigilance against such criminal activities within the crypto sector. Tether has taken proactive steps by forming the T3 Financial Crime Unit to combat fraud involving USDT, freezing over $12 million linked to scams and fraudulent operations.
Despite the accusations, Circle has not responded directly to the allegations made by ZachXBT. The incident has fueled discussions around stablecoin regulation and anti-money laundering measures, particularly concerning the involvement of state-backed hacker groups like Lazarus in illegal activities using digital assets.