How North Korea Pulled Off the Biggest Heist in History

0:01This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required. Compatibility and availability varies 18+. This holiday, all plans, even unlimited, are just$15 a month. A holiday deal this good obviously deserves an enormously expensive holiday song, like All I Want.

0:36Right. Okay, we can afford that. You know what? Forget the music budget. We're going to stick with whatever's in the public domain. Give it a try at mintmobile.com slash switch. Upfront payment of$45 for three months,$90 for six months, or$180 for 12-month plan required,$15 per month equivalent, taxes and fees extra. New customer offer for initial plan term only greater than 50 gigabytes me slow when network is busy. See terms. I've made quite a few videos about crypto and the comments section usually fills up with people telling me that I just don't get it. Traditional banking is broken they tell me and the future is a financial system with no banks where nobody can freeze your money or reverse your transactions.

1:14Well, I guess I need to apologize as this week I found a crypto investor who lives by every one of these principles and who stuck to them through one of the most difficult weeks the industry has ever had. It's the North Korean government. Last Thursday, North Korean hackers took roughly$6.3 billion from Binance, the world's largest crypto exchange, most of it in the first 30 minutes. Elliptic, a blockchain analysis firm, told the FT that it was almost certainly the largest theft of any kind in history. The previous crypto record was last year's$1.5 billion hack of Bybit, which was also North Korea.

1:59So they've lapped both the field and themselves with this one. The biggest conventional bank robbery in history was the Central Bank of Iraq in 2003, and I think Saddam Hussein and his sons were in on that one. it was for about a billion dollars. So after years of promises, crypto has finally disrupted something. About an hour and a half into the hack, Binance posted a statement assuring customers that their funds were safe. Now usually when a company announces out of nowhere that there's no need to panic, you should probably panic. 15 minutes later, Binance's systems topped up one of its wallets with an additional$200 million.

2:45The hackers had controlled that wallet for more than an hour and they scooped up the money 72 seconds later. Traditionally, bank robbers have to bring their own bags. To be fair to the crypto purists, the blockchains themselves were never breached. In fact, they recorded every single theft with perfect accuracy. Binance is a centralized exchange, a company with a database and some executives, and this is something that the purists have been warning people to avoid for years. The weak point was the company. When masked men walk into a bank and ask the teller for six billion dollars, the teller tends to ask a few follow-up questions.

3:29Binance's systems, as far as anyone can tell, signed everything they were handed. While the centralised nature of Binance allowed the hack to happen, the centralised nature of two stablecoin companies also allowed them to press a button called Add Blacklist, preventing the hackers from getting away with all of the money. North Korea, I'd note, would never press a button like that. Binance kept withdrawals frozen until Sunday morning. This is the traditional response to a bank run, and it works for the reason you'd expect it to. Money that can't leave the building can't run. Binance also promised to cover every dollar of the losses itself, which is generous because according to Alexander Shirtcliff, a lawyer at Edwin Co., it doesn't have to.

4:20In comments reported by Finance Feeds, he pointed out that Binance's terms of service limit its liability to customers, and he said customers should not regard this as legally binding. It's probably just good business, since an exchange that didn't pay up wouldn't have many customers left after a hack like this. When Binance lifted its withdrawal freeze on Sunday, customers pulled$4.7 billion out of the exchange, about 3 % of the assets, according to Reuters, which analysts read as a sign that customer confidence mostly held given the size of the bridge. This episode is brought to you by Google Chrome.

5:02You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required compatibility and availability varies 18+. When you're building a company, you learn that trust is what closes deals. You may have the best product, but buyers won't sign without proof that your product is secure, especially if it has AI.

5:34Vanta gets you compliant fast with SOC 2, ISO 27001 and more and keeps you secure with continuous monitoring. Hyperbound, a YC-backed startup, used Vanta to unlock the Fortune 100 in under a year. Snowfire got audit ready in a month and closed a multi-million dollar deal. Trust matters. Get started at Vanta.com. Binance is enormous. It has around 335 million users. It handled$34 trillion of trades last year. And for most of its existence, it couldn't tell you which country it was based in. It was founded in China in 2017 by Changpeng Zhao, who goes by CZ. A few months later, China banned crypto exchanges, so Binance moved to Japan.

6:19CZ published a memoir earlier this year, and according to the FT Alphaville review, when Japan's financial regulators started asking whether Binance was registered, CZ wrote, deep down I had a feeling we might need to move again soon. While traditionalists might view this as a questionable approach to regulatory compliance, it does have the advantage of being very easy to explain. Binance moved to Malta next, until Malta's financial regulator announced that Binance wasn't actually authorized to operate there. For years after that, when people asked where the business was headquartered, they simply declined to answer.

7:02Eventually, the world ran out of places to move to, or CZ got tired of traveling. In 2023, Binance pleaded guilty to breaking US anti-money laundering and sanctions laws and paid$4.3 billion in penalties. According to the US Treasury, Binance had not reported more than 100 ,000 suspicious transactions, including ones linked to ransomware, terrorist groups and large-scale hacks. CZ pleaded guilty to a single charge over Binance's anti-money laundering failures, served four months in a federal prison and was pardoned last year. In his memoir, he describes prison as designed to deliver the lowest possible customer satisfaction.

7:50I don't believe he mentions whether he would use the service again. Last December, Binance finally settled on a regulator in Abu Dhabi, although it still won't call it a headquarters. It isn't allowed to sign up new customers in the UK. It left Canada in 2023. It doesn't serve Singapore and it doesn't officially serve Americans either, although it is under US supervision until 2028. It was also ordered to wind down its EU business in July and regulators in Europe are asking why it still seems to serve customers there. Binance says that those customers sought it out entirely on their own initiative, under a legal exemption called reverse solicitation, which I guess is how all web traffic works.

8:41So, everybody possibly has jurisdiction over Binance, it's quite hard to say, but nobody has jurisdiction over the people who robbed it. To this point, it's not even clear why the FBI even cares about this. Binance is not supposed to have any US customers, or at least its US customers are supposed to use Binance.us, which the Wall Street Journal says was unaffected by the hack. That doesn't stop them from trying, though. The FBI is investigating along with the Secret Service and the IRS. The US seems to care because North Korea is under American sanctions. The proceeds are taught to fund its weapons programs and stolen money usually passes through American companies at some point, which is where the FBI can try to grab it.

9:33The FBI and the main blockchain analytic firms are blaming the hack on Trader Trader, a hacking unit of the North Korean state. And North Korea does have a long history of building out its reserves by unconventional means. Per the FT, in the early 2000s, the US accused the regime of drug trafficking, making counterfeit cigarettes, producing highly sophisticated fake$100 bills known as supernotes, and filing dubious insurance claims. In 2010, Washington sanctioned Office 39, the secretive bureau that manages money for the North Korean leadership, which also sounds like a low-end WeWork competitor.

10:19The thing is that counterfeiting has logistics problems. You have to move all of that paper money around. It's just a lot of work and old-fashioned. Once the crypto industry built a means for moving value without a courier, Pyongyang quite sensibly pivoted. I believe the term is that they were orange-pilled. According to South Korea's intelligence service, North Korea has about 8 ,400 people working in cyber warfare. The FT reports that students who excel at math and science are picked out in their teams and trained in hacking. There's even a university course that mixes military training with code breaking.

11:02The graduate employment rate is presumably excellent. Last year, according to Chainalysis, North Korean hackers stole about$2 billion in crypto, which was roughly 60 % of all the crypto stolen worldwide. As employees of the state, they don't have to worry about extradition. And as far as anyone knows, nobody has ever asked them to complete an anti-money laundering training module, which makes them, by some distance, the most successful crypto investors I've ever covered on this channel. Although North Korea denies any involvement, with Kim Jong Un's sister calling the accusation a grave political provocation, according to state media.

11:49So my favorite crypto investor won't even admit to being in crypto, which is modest of them. You might imagine that pulling off the largest heist in human history would involve smashing through firewalls in the dead of night with the aid of some incredibly sophisticated AI. The North Korean hackers were a lot more relaxed than that. The clearest explanation of how the hack worked that I've found comes from Harry Donnelly who writes breakdowns of crypto hacks on Substack, and the analogy I'm about to use is his. According to him, the hackers spent about 37 hours practicing the attack out in the open on public blockchains, and four hours before the real thing, they ran a final dress rehearsal on their own wallets with the same code that they would point at Binance.

12:41It's good to see people take a rehearsal seriously. Their target was Binance's hot wallets. Customers expect to be able to withdraw their money instantly, so exchanges keep billions of dollars in online wallets that pay out automatically with no human checking each payment. Binance's biggest Ethereum hot wallet has handled over 31 million transactions, and on the evening of the hack, it was holding about$2.5 billion in 64 different tokens. It was extremely good at sending money to people. The tool the hackers used was a feature added to Ethereum last year called EIP 7702. Before that, a signature on a simple wallet authorized one payment.

13:32After the change, a wallet could sign a short note that, as Donnelly puts it, says, from now on, follow this program's rules. It was designed for convenience so that you could bundle payments together. It worked exactly as intended. The convenience just went to someone else. There was one big obstacle, however. Each wallet numbers its outgoing transactions sequentially, and a note only works if it carries the number that's next in line when it lands. Donnelly compares this to a company checkbook. In this analogy, Binance is the company, the hot wallet is its checkbook and the Ethereum network is the bank.

14:15To stop old paperwork from being reused, the bank will only accept a form with the next check number on it. Paperwork with any other number gets rejected. Binance's wallet was paying out customer withdrawals non-stop, so the next check number was constantly changing and the hackers couldn't know in advance which number their note would need. So, they covered every likely number. They wrote a note that essentially said, add this person to the account, made 50 copies of it, each with a different upcoming check number, and got Binance's signing system to sign all 50. As far as anyone can tell, Binance hasn't said how its signer works.

15:00It signed whatever it was handed without reading any of it. In crypto this is called blind signing. In most other industries it's called not reading the contract. The bank binned 49 of the 50, but number 35 matched. The misses cost the hackers nothing, and I believe it's the first time a 2 % success rate has made anyone billions of dollars. From that point on, the hackers were on the account, and they had no further need for Binance's signature. About three minutes later, a single transaction moved almost all of it out of the wallet, leaving exactly one Ether behind, which is I suppose good manners.

15:43On the other blockchains, they didn't need anything so clever. On Bitcoin, XRP, Tron and several others, Binance's signing system simply signed ordinary payments to the hackers, and the note on the Ethereum wallet kept working. That wallet also controlled a second account holding USDC, so the hackers moved another $820 million out of that. Meanwhile, Binance's own systems kept topping the wallet up, which as we saw earlier, the hackers collected within seconds. It took Binance until 10 past midnight, almost four hours after the note went through to take the hacker's name off the account. So, how did they get into Binance's signing system in the first place?

16:33This Tuesday Binance published an initial report on its investigation. A few days later than the 48 hours it had originally promised, co-CEO Richard Teng described the hack as a months-long campaign, which started with someone looking for an AI coding tool. Back in June, one of the engineers who looks after Binance's wallets went searching for a popular AI coding assistant, clicked on an internet ad and downloaded a tampered version of the installer. Binance's security team spotted it, replaced his laptop and changed his credentials. But by then the hackers had learned what his job was and who he worked with.

17:17In September, a second engineer was approached on a job hunting site by a project director from a company that turned out not to exist. After a first interview with a fake HR person and a second with the fake company's fake CEO, he was asked to download an assignment onto his work computer, which he did. The assignment contained malware, and Binance says its security software didn't catch it. North Korea, as the FT has reported, already has operatives posing as remote workers to get hired by Western companies. It now appears to be working both sides of the job market. On October 20th, the hackers used that laptop and one of Binance's own internal AI tools to take control of two more engineers' computers.

18:11And on one of them, they found a token that let them deploy software. On the 29th, they used it to get into Binance's internal wallet signing service and send transactions that bypassed the normal withdrawal process. There was a lot of speculation last week about whether the hackers had used AI. It turns out that they did. It was Binance's. That also explains why it took almost four hours to stop. Binance splits control of its keys between several parties so that no single person can move the money, which turned out to mean that no single person could quickly stop someone else moving it either.

18:55Suspending withdrawals didn't help because the hacker's permission was already sitting on the blockchain and Binance had to come up with a procedure to cancel it. Binance's keys, by the way, were never compromised. They were just extremely helpful. The central promise of cryptocurrency is that transactions are irreversible and censorship resistant. There's no manager you can complain to and no central authority that can freeze your account. This is usually presented as being a feature right up until the moment where someone and steal$6 billion from you. As Matt Levine pointed out, Satoshi Nakamoto's white paper criticizes traditional banks because completely non-reversible transactions are not really possible.

19:4518 years later, the crypto industry spent a whole night trying to reverse as many transactions as it could. Whether they'd be able to do that or not came down to a race. According to the FT, about$2.8 billion of what was stolen was in stablecoins issued by Tether and Circle. Stablecoins are issued by companies with executives, compliance departments, sort of, and a button that freezes your money. So, the hackers needed to swap these freezable tokens for something nobody could freeze before anyone pressed that button. Tether got there first, pressing that add blacklist button, and Circle did the same three minutes later.

20:33Between them they trapped about$2.4 billion, and anything else the hackers moved into those wallets was frozen on arrival. Levine points out that this goes further than a freeze. Tether and Circle can't send the frozen tokens back, but they can decide that those tokens no longer count and issue new ones to Binance to replace them. As he puts it, you end up with centralized intermediaries performing a quasi-law enforcement function and reversing transactions. So the decentralized financial system survived its biggest crisis by doing exactly what a traditional bank would have done. Now this isn't the first time a private company that prints its own money has had to deal with a heist.

21:20American viewers might find this a bit strange, but in Northern Ireland and in Scotland, a handful of ordinary commercial banks are allowed to print their own paper currency. They're in pound sterling and the law requires each bank to hold an equal amount of Bank of England money to back them. So a Northern Bank£10 note is always worth 10 pounds, which if you think about it makes it a stablecoin printed on paper. Americans had something similar until the 1860s when private banks issued their own dollar bills. In December 2004, thieves took about 26.5 million pounds from Northern Bank's headquarters in Belfast, including roughly a tenth of all the Northern Bank notes in circulation at the time.

22:10Most of it was in brand new notes with known serial numbers. Northern Bank did essentially the same thing that Tether did. It decided that the stolen money was no longer money. It recalled every one of its 10, 20, 50 and 100 pound notes, about 240 million pounds in total, and replaced them with new notes in different colors. It took 95 branches, a special command room, extra police on the street and about three months. Tether did the same thing on a much bigger scale in under an hour. Some of the old northern banknotes did turn up later. £2.3 million were found buried in compost in County Cork and£50 ,000 were found in the toilets of a police social club in Belfast.

23:04To a crypto purist, the way the tokens were cancelled is a betrayal of a core crypto principle. But as I mentioned earlier, one participant refused to compromise. The North Korean hackers knew the freezes were coming. So while the rest of the industry was rediscovering the joys of centralized banking, North Korea was dumping$434 million of Tether for Ether, an asset with no company backing it and no button to press. According to Donnelly, they were in such a hurry that they sold at between 12 and 26 % below the market price, giving up more than$50 million in a matter of minutes to stay on a truly decentralized ledger.

23:50Now, you have to admire that level of ideological commitment. Few investors have been willing to take a hit of up to 26 % for their principles. And I'm starting to think that they may be the last true believers in crypto. So, who was on the other side of all that panic selling? Those discounts were somebody else's profit. As the hackers dumped stablecoins and bought Ether and other tokens wherever they could find them, They pushed prices wildly out of line between exchanges, and according to Bloomberg, a handful of quick-witted trading firms spent the night picking off those trades. The blockchain data firm, BitQuery, estimates that the hackers lost about$120 million to poor execution, with about half of it going to the traders and arbitrage bots.

24:44Matt Levine made the point that taking a hit like that when you push this much money through thin markets isn't really bad execution. When laundering stolen money, your demand for immediate liquidity is unusually high and you pay for it. Getting into assets that nobody can freeze is only half the job though. You still have to eventually turn them into money that you can spend on whatever it is that Kim Jong Un spends his money on. Armoured Mercedes limousines mostly if the photos are anything to go by. He just doesn't look like a Lambo guy, does he? Long term viewers will remember my video on Dutchie and the croc, the legendary rapper and her husband who were caught laundering bitcoin from the 2016 hack of the Bitfinex exchange, a hack that Dutchie later admitted to carrying out himself.

25:38They were sitting on billions of dollars worth of bitcoin and could barely spend any of it because every time money came out, the FBI was able to follow it straight back to them. Their problem was that they had an address. North Korea doesn't have this problem. Well, it does have an address, it's North Korea, but it's not the kind of address the FBI can turn up with a search warrant. And no precious metals dealer is going to ask Kim Jong-un for a photograph of his driver's license. Turning the stolen crypto into money still isn't easy. In the first four days, according to Elliptic, the hackers used about 12 ,000 wallets across 11 blockchains, opening a new wallet every 25 seconds.

26:27Elliptic's Tom Robinson told the FT that it looked like scripts run by people, with pauses that look like human working patterns. So even North Korea's hackers take a lunch break, which is better working conditions than Binance's signing system gets. Chainalysis co-founder Jonathan Levin told the FT that the hackers simply had too much money for their trusted laundering venues to handle, which is a problem most investors would love to have. Eventually, Robinson expects it to be sold to over-the-counter brokers who ask little or no questions. Nobody expects them to hurry. Elliptic says hardly any of it has been turned into cash so far, and according to the think tank 38Nord, named after the 38 parallel that divides the two Koreas, one analytics firm found a stash of North Korean crypto from as far back as 2017 that still hasn't been laundered.

27:30These guys are the ultimate long-term investors, diamond hands. They certainly added to their holdings this week. Strategy, Michael Saylor's company, formerly MicroStrategy, announced on Monday that it had bought 811 Bitcoin during the week of the hack, and Saylor celebrated with a post saying, we found room for even more orange. Over the same week, North Korea acquired 18 ,270 Bitcoin. For once, Michael Saylor was the small investor. What surprised a lot of people was how the market reacted. When FTX collapsed in 2022, Bitcoin fell 19 % in three days. This time it fell about 5 % and has been fairly steady since.

28:20Part of the reason is that Binance was buying tokens to replace the ones that had been stolen. And as Kelly Yee at the trading firm Talos told Bloomberg, the market treated this as an operational shock, not a systemic one. FTX was a fraud. This was a robbery. And the victim could afford it. That said, after the Bybit hack last year, Bitcoin also held up at first and was 14 % lower a week later. So, it may be early to celebrate. Crypto stocks were less forgiving. One day after the hack, Coinbase fell about 11%, although in fairness it had also just reported quarterly results showing that its trading revenue had fallen 44%.

29:07Circle, which froze$800 million of the stolen money within minutes, saw its shares fall about 9 % anyway. No good deed goes unpunished. Which leaves us with an odd result. The decentralized asset at the center of the largest theft in human history did fine, while the centralized regulated listed companies took a beating. Possibly that's because Binance itself is privately owned. So if you want to sell something crypto related on the stock market after a crypto disaster, yeah. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50 page restoration block, or finally break down that long article you've had open for weeks.

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30:36Have to sell someone else's stock. So Binance has a 6.3 billion dollar hole to fill and it has promised to cover every dollar itself. It hopes to get a bit under half of that back eventually from the stable coins that Tether and Circle froze. But in the meantime Binance is fronting the money. The first place it turned was its emergency fund, which is called the Secure Asset Fund for Users or Seifu. I think there's some sort of a crypto joke in that name too, but I'm not going to look it up. Binance keeps this fund in Bitcoin, and there's a respectable case for doing that. Binance's liabilities are largely in crypto.

31:21If a customer's Bitcoin is stolen, Binance owes them Bitcoin, whatever its dollar price. So holding the reserve in Bitcoin matches the asset to the liability. Treasurers call this a natural hedge. It works perfectly provided two conditions are met. The thieves only steal Bitcoin and they steal less of it than the fund holds. Unfortunately, the thieves took billions of dollars in stablecoins in Ether, and the Bitcoin that they did take was worth more than the whole fund. Because a$6.3 billion hack of the world's largest crypto exchange tends to rattle crypto markets even if just a bit, the price of Bitcoin fell.

32:05According to the Wall Street Journal, the value of the fund dropped by about$100 million at the exact moment Binance needed it. It's a bit like a fire insurance policy that pays out in kindling. Luckily Binance is enormous and it makes enough money in trading fees to cover the difference out of its own pocket On the night of the hack one account on Twitter estimated that once the freezes were taken into account Binance's loss would be about a billion dollars CZ replied loss might be a bit higher than that but will cover It turned out to be about three times higher, which in crypto counts as a bit.

32:49Binance's executive spent that night in a war room of about 100 people working with the FBI and the Secret Service. Binance's founder spent the next day arguing with Elon Musk on Twitter. It started when an account called Baseball Bonk Inu, which I assume is a respected market commentator, replied to CZ with a screenshot of a tweet Sam Bankman-Fried posted in 2022, a few days before FTX went bankrupt, which said FTX has enough to cover all client holdings. Elon Musk responded to that with a grimacing face emoji. CZ replied, Elon, have a lot of respect for you, but bad time to troll. Please stop.

33:36He then reminded Musk that Binance's SpaceX shares, which came from its$500 million investment in Musk's takeover of Twitter, are now worth more than a billion dollars, and added, would appreciate if you show a little support. Thanks. So, just to keep track of the corporate governance here, Binance was using Twitter to remind Elon Musk that it owns a piece of his rocket company, which is really more of an AI company, because it helped him buy Twitter. Binance's co-CEO, Yee Hee, then joined the thread to tell CZ that Binance's annual revenue was enough to cover the losses, adding, we do not need to sell the SpaceX shares you're bullish on.

34:22CZ replied that he wasn't planning to sell and had only mentioned the shares to Musk so that he can be less worried, which was a polite way of reminding Musk that Binance owns a block of his company's stock and knows where the sell button is. While SpaceX has a huge market cap, only a tiny sliver of its shares are actually tradable or floated on exchange, meaning that this is a bigger button than it at first sounds like. Most of the coverage of Binance's response was glowing. Bloomberg reported that many experts were impressed by how quickly Binance reacted, how often it posted updates, and the fact that it was paying for the losses out of its own profits.

35:07But, as we saw earlier, the hackers got in because a job interview assignment was downloaded onto a work computer, and one of Binance's own AI tools could take over other engineers' laptops. Binance's co-CEO said it should never have happened, and pointed out that Binance had stopped 57 suspected North Korean attacks this year, which is a save rate most goalkeepers would be proud of, although most goalkeepers don't concede$6.3 billion. I'm surprised by how little weight people are putting on the security failure. After the biggest theft in history, customers pulled only about 3 % of their money out, and Bitcoin barely moved.

35:54And as Donnelly points out, the loss was bigger than the entire crypto insurance market, so there was never an insurer to raise Binance's premiums. What got rewarded was a fast, reassuring tweet and a balance sheet big enough to pay for the mistake. There's a famous scene in the film It's a Wonderful Life where a crowd starts a bank run on George Bailey's bank. And Bailey explains to them that their money isn't sitting in the vault. It's tied up in Joe's house and the Kennedy house and Mrs Macklin's house and a hundred others. A Blue Sky user called D. Lavoie had some fun reimagining the Binance version of that speech by posting this image.

36:39Binance isn't a bank, and it says that its customers' money actually is sitting in the vault, which as we've seen, is also what made it so easy to steal. So the question is, if you keep your money on Binance, who are you sharing the vault with? Last year, the FT got hold of some internal Binance files on a network of 13 suspicious accounts, and they give us some idea. One account belonged to a junior bank employee in Caracas, Venezuela, who moved$93 million through it. His account was logged into from Caracas one afternoon and from Osaka, Japan at 1.30 the next morning. So, he either has a private jet or someone else had his password.

37:26With$93 million, I suppose he could afford the jet. It's just not clear why he works as a junior bank employee. Another was opened by a Brazilian man who was later charged over an alleged illegal gold trading operation. He used a battered 20-year-old ID card with an illegible date of birth, a photo that didn't look much like his selfie, and a woman's email address. After what the files describe as enhanced due diligence, Binance recorded the wrong date of birth and a monthly income of 7 ,000 with no currency specified. The account went on to receive 16 million dollars. The investigation into this man's family began when a relative tried to cross into Venezuela with$50 ,000 in cash, which he told border guards was for buying sausages from a Chinese acquaintance.

38:26Now, while I happen to share a name with a former president of the American Meat Institute, I can't claim to have any expertise in the cross-border sausage trade, but that strikes me as quite a lot of sausages to be buying in cash. In September, US prosecutors moved to seize$61 million that they allege two Chinese companies, Hexa Whale Trading and Blessed Trust, passed through Binance accounts as part of a network handling$1.5 billion from black market Iranian oil sales. Binance points out that the case wasn't filed against it and that it doesn't allege any wrongdoing by Binance. So, George Bailey's depositors were lending their money to Joe and Mrs Macklin.

39:18Binance's customers are sharing an exchange with an alleged sanctions-busting oil trader, well-traveled and surprisingly wealthy bank clerks, and an international cash-settled sausage entrepreneur, which is a slight departure from the George Bailey business model. Binance told the FT that it maintains strict compliance controls, and its lawyers said any suggestion that it knowingly facilitated bad actors is baseless. According to the FT, some of the activity in those files took place after Binance's 2023 guilty plea, and after the US had installed monitors to keep an eye on its compliance. The crypto industry has been promising to build a new financial system for the last 18 years, one that is beyond the reach of governments, where transactions cannot be censored, where no central authority can freeze your account, and where you never have to trust a bank with your money.

40:20As we saw this week, the industry itself has mostly given up on those ideas. I'd argue that crypto is now more centralized than the system it set out to replace. Traditional finances split up country by country with dozens of regulators, hundreds of exchanges and thousands of banks. Crypto has one exchange holding about six times as much as its next nearest rival, a few whale investors and two companies issuing most of its dollars. When the crisis came, its biggest exchange gated withdrawals, paid for the damage out of its corporate balance sheet, and relied on two stablecoin companies to do the policing.

41:03But I think we have to acknowledge that one participant stayed true to the original vision. North Korea holds its own keys. It makes irreversible transactions. It trusts no third parties other than its trusted laundering venues. It is in no hurry to sell either. It's the only crypto enterprise in the world with a clear business plan and full independence from regulators. Somewhere in Pyongyang, the dream of a decentralised censorship-resistant, sanctions-proof financial system lives on. It's just not exactly where its inventors had in mind. Thanks for tuning into this week's podcast. The podcast is entirely supported by viewers like you on Patreon.

41:49And if you'd like to support it, you can sign up using the link in the show notes. Have a great week and talk to you again soon. Bye.

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