Railgun under scrutiny for alleged use by North Korean threat actors

Railgun, a crypto privacy protocol once labeled a “prime alternative to Tornado Cash” by blockchain security firm Elliptic, has denied allegations that U.S.-sanctioned entities, including North Korea, are using its platform to launder cryptocurrency.

The denial comes as Railgun’s total volume approaches the $1 billion mark, bolstered by recent praise from Ethereum co-founder Vitalik Buterin.

In January 2023, the FBI claimed that North Korean cyber attackers used Railgun to launder more than $60 million worth of Ether (ETH) from the 2022 Harmony Bridge heist. However, Railgun refuted these accusations in an X post responding to crypto reporter Colin Wu, calling it “false reporting.”

“Firstly, that group is blocked from using the RAILGUN system by the ‘Private Proofs of Innocence’ system, which went live over a year ago,” Railgun stated. “Secondly, it was a mistaken, false allegation in the first place,” the protocol asserted.

Railgun, founded in January 2021, utilizes zero-knowledge (ZK) cryptography to shield wallet balances, transaction history, and transaction details, allowing users to interact with decentralized apps (DApps) on Ethereum or other supported chains while maintaining privacy. The protocol launched its Private Proofs of Innocence (Private POI) system in January 2023, which uses cryptographic assurance to prevent funds from known undesirable transactions or actors from entering the Railgun smart contract.

Vitalik Buterin recently defended Railgun, arguing that “privacy is normal” and that the privacy pools protocol makes it “much harder for bad actors to join the pool.” Buterin’s endorsement coincided with reports that he had sent 100 ETH worth $325,000 to Railgun on April 15, causing a surge in the protocol’s native token, Railgun (RAIL). The token is currently trading at $1.17, up 86% over the past seven days.

According to Dune Analytics data, Railgun’s total volume has reached $962 million, with its total value locked on Ethereum, where most of the protocol’s activity takes place, crossing $25 million.

The allegations against Railgun come at a time when privacy protocols are facing increased scrutiny from regulators. Last week, U.S. Treasury Deputy Secretary Adewale Adeyemo highlighted the misuse of anonymity-enhancing technologies by terrorist groups and rogue nations to conceal the origins of illicit crypto funds. In response, several crypto trading platforms, including Binance and OKX, have delisted privacy-focused digital assets to comply.

This article first appeared at Crypto Briefing