Blockchain Sleuth Critiques Pseudo-Decentralized Protocols

Blockchain investigator ZachXBT has criticized pseudo-decentralized protocols for profiting from exploits linked to North Korea.

Industry Under Fire

The crypto sector is facing scrutiny for its management of hacks and questionable activities. ZachXBT has called out several pseudo-decentralized platforms for profiting from North Korea-linked exploits while avoiding accountability.

In a Telegram post on March 18, ZachXBT referred to the Bybit hack, where nearly $1.5 billion was stolen, as “eye opening.” He warned that without government regulations, the industry’s security issues may worsen, potentially harming the entire sector.

Profiting from North Korean Exploits

ZachXBT stated that many so-called “decentralized” protocols derive a significant portion of their fees from transactions tied to North Korean hacks. He highlighted that they refuse to take responsibility for their role in enabling these activities.

His comments seem to target services like eXch and THORChain, which profited as North Korean actors laundered stolen Bybit funds through their platforms. Bybit CEO Ben Zhou mentioned that more than $200 million of the stolen funds had become untraceable shortly after the hack due to mixing services not cooperating with the investigation.

KYC as a Honeypot

ZachXBT also criticized centralized exchanges, noting that some take “multiple hours” to respond to the movement of illicit funds within their platforms, even as laundering occurs in minutes. He did not specify which exchanges he was referring to.

He argues that current security measures—such as know your transaction (KYT) systems—are “flawed and easily evadable.” He claims that know your customer (KYC) regulations mostly serve as a “honeypot” for ordinary users, compromised by frequent breaches and insider leaks.

In February, North Korean hackers targeted Bybit, stealing approximately $1.46 billion in a sophisticated heist facilitated by compromising an employee’s computer at Safe, Bybit’s tech provider.

Additional Reading

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