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The recent Lazarus Group fund freeze has placed Circle, the issuer of USDC, under scrutiny for its delayed response in blacklisting the group’s assets. Blockchain investigator ZachXBT criticized Circle for taking over four months longer than other major stablecoin issuers to act against the Lazarus Group. While Circle ultimately played a role in the freeze, the delay has sparked backlash within the crypto community, raising concerns about the company’s commitment to swift action in such cases.
On September 14, ZachXBT revealed through an X post that stablecoin issuers like Tether, Circle, Paxos, and Techteryx blacklisted two wallets linked to the Lazarus Group fund freeze. However, critics have highlighted the fact that despite this, some of the funds remain unfrozen.
ZachXBT, known for his meticulous blockchain investigations, shared that $4.96 million in assets were blacklisted by stablecoin issuers, including Circle, as part of the Lazarus Group fund freeze. Yet, despite the freeze, these wallets continue to hold a staggering $720,000 in DAI and $313,000 in Ethereum, which have yet to be seized.
These unfrozen assets are part of a broader investigation ZachXBT began in April. His research has revealed that the Lazarus Group laundered over $200 million from 25 crypto-related hacks between 2020 and 2023, raising concerns about the scale of their criminal activities. Despite some funds being frozen, the fact that a portion remains untouched has raised eyebrows.
According to ZachXBT, $6.98 million has been frozen in relation to the Lazarus Group fund freeze. This includes $1.65 million held across multiple exchanges, though he has remained tight-lipped about which exchanges are implicated.
“Circle’s delayed response in the Lazarus Group fund freeze raises serious questions about the company’s commitment to fighting money laundering in the crypto space,” ZachXBT stated.
This gap, according to ZachXBT, is a major oversight, particularly in an industry fraught with vulnerabilities to attacks like those perpetrated by the Lazarus Group.
“It’s shocking that with over 1,000 employees, Circle doesn’t have an incident response team in place,” ZachXBT tweeted. “Their inaction in the Lazarus Group fund freeze case shows a glaring gap in their preparedness to combat such threats.”
The delayed response by Circle in the Lazarus Group fund freeze case has raised wider concerns across the crypto community. Stablecoin issuers play a critical role in preventing illicit funds from circulating within the ecosystem, and delays in freezing assets can allow bad actors more time to launder money.
Circle’s slow action has drawn attention to the importance of real-time response mechanisms in safeguarding the cryptocurrency industry from further exploitation.
The Lazarus Group, already notorious for their involvement in several high-profile crypto hacks, continues to pose a major threat. In recent reports, the group has been linked to the $20 million hack of the Indodax exchange, with suspicions that they have stolen approximately $3 billion from the cryptocurrency industry to fund North Korea’s weapons program. The Lazarus Group fund freeze is just the latest in a long string of incidents that highlight the group’s ongoing presence in the crypto world.
Experts in the field have expressed varying opinions about Circle’s role in the Lazarus Group fund freeze and their overall approach to combatting money laundering.
Alex Gladstein, Chief Strategy Officer at the Human Rights Foundation, commented, “The Lazarus Group fund freeze highlights how essential it is for stablecoin issuers like Circle to be proactive. The delay here is concerning, especially when we’re dealing with actors tied to large-scale criminal activities.”
On the other hand, Jeremy Allaire, CEO of Circle, has defended the company’s actions. In a recent statement, Allaire argued, “While we acknowledge that our response could have been quicker, we remain committed to ensuring that our platform is not used for illicit purposes. The Lazarus Group fund freeze is an important reminder of how complex and multifaceted these investigations can be.”
The Lazarus Group fund freeze has cast a shadow over Circle’s reputation in the crypto industry. While the company eventually took action, the delay in freezing the funds has not gone unnoticed.
With billions of dollars in cryptocurrency at stake and the Lazarus Group continuing its exploits, the need for swift, decisive action from stablecoin issuers like Circle is more critical than ever.
As the investigation unfolds, it remains to be seen how Circle will address the concerns raised by ZachXBT and others in the crypto community. One thing is clear — the Lazarus Group fund freeze has exposed a significant vulnerability in the industry’s fight against cybercrime, and Circle’s delayed response has placed them squarely in the center of the debate.
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