Jae Kwon stated that a significant part of the Cosmos network’s liquid staking module was developed by North Korean hackers, which was due to the alleged negligence of Iqlusion and its leader Zaki Manian.

Jae Kwon, co-founder of Cosmos and president of the Interchain Foundation, said that a vulnerability audit of the Cosmos ecosystem revealed that much of the liquidity rate module (LSM) code created by Iqlusion for the Cosmos Hub was developed by North Korean IT specialists.

“It’s important to note that LSM is not a standalone module, but a series of modifications and extensions built on top of Liquid’s existing staking functionality, added to the core Cosmos SDK staking functionality. Therefore, any vulnerability in Iqlusion’s LSM that affects these core modules could potentially put all staking ATOMs at risk since Liquid staking directly interacts with staking assets,” stated Jae Kwon.

Development of LSM began in 2021, an initiative of the Interchain Foundation (ICF) and led by Iqlusion. The works were curated by Zaki Manian. Two developers were involved in working on the project: Jun Kai and Sarawut Sanit.

The specialists hired by Iqlusion were developing the code base until December 2022, until the FBI identified their connection with North Korean hackers and contacted Zaki Manian.

Jae Kwon believes that Zaki Manian deliberately hid important information about code developers, as well as related security issues, from the Cosmos community for several years.

“For sixteen months, LSM was developed by individuals associated with North Korean hackers, and their designs were integrated into the Cosmos Hub without proper security checks,” Kwon said.

The Cosmos co-founder accused Iqlusion and Zaki Manian of “gross negligence” and called for a comprehensive audit of LSM by the management community.

Previously, a CoinDesk investigative report uncovered dozens of cases in which American crypto companies unknowingly hired IT specialists from the Democratic People’s Republic of Korea.