Internal Conflict at Thorchain as North Korean Hackers Leverage Network for Crypto Laundering

Thorchain, the interoperability-focused decentralized exchange protocol, is losing key developers as internal disagreements escalate over how to handle illicit funds flowing through the network.

The issue gained urgency after reports confirmed that North Korea’s Lazarus Group has been using the protocol to launder Ethereum (ETH) stolen in the recent Bybit hack.

Developers Look to Quit Over Failure to Block Illicit Funds

Pluto, a core Thorchain developer, announced his resignation on February 27th, citing frustration over the network’s inability to block sanctioned transactions. Another developer, known as TCB, has also indicated he may step away unless immediate action is taken to prevent North Korean hackers from using the platform.

A temporary vote to halt ETH trading was quickly reversed which raised concerns about governance and control within the protocol.

In a post on X, TCB criticized Thorchain’s claims of decentralization and argued that the network is largely controlled by a small group of infrastructure providers and corporate actors.

He pointed out that while Thorchain promotes itself as censorship-resistant, many wallet providers that integrate with the protocol already enforce transaction filtering.

Thorchain’s Decentralization Claims in Question

Unlike Bitcoin or Ethereum, which have thousands of independent validators, Thorchain has a smaller, more centralized validator set. TCB argues that this structure makes it vulnerable to regulatory pressure and enforcement actions. Some developers have previously suggested changes to improve decentralization, such as introducing lighter node implementations, but these efforts have not been widely adopted.

The situation places Thorchain at risk of further disruptions. If wallet providers and infrastructure partners step away, the protocol could face liquidity issues. Meanwhile, law enforcement agencies, including the FBI, are increasing their focus on Lazarus Group’s laundering methods, which, in turn, could bring additional scrutiny to Thorchain.

The departure of key developers raises questions about the project’s future. If it continues to allow illicit transactions, regulatory action could follow. If it enforces restrictions, it may alienate users who prioritize decentralization.

“For those that hate me for speaking out against the cult, don’t worry there is a good possibility this is one of the last time I ever speak publicly about Thorchain. When the huge majority of your flows are stolen funds from north korea for the biggest money heist in human history, it will becomes a national security issue, this isn’t a game anymore.”