Exclusive: California EDD Fraud Money Paid for North Korea Nukes?

One of North Korea’s top exports is hair.

That’s not a typo and you did not read that wrong and it doesn’t mean fur or wool. It means hair.

In 2023, North Korea exported “feathers, artificial flowers, hair” to the tune of $167 million, nearly half of its legal exports.

How then does a country that exports hair pay for its nuclear weapons program? By crime, consisting mostly of illegal arms sales, counterfeiting other currencies like dollars, and cybercrime.

Enter California’s Employment Development Department.

During the pandemic, the California Employment Development Department (EDD) lost somewhere between $39 and $50 billion dollars to fraud and, according to security experts, a very large chunk of that ended up in North Korea, at least enough to help fund its nuclear missile program.

Even using a low but reasonable – according to experts – estimate of 10% of that amount ending up in North Korea, that would mean at least $4 billion dollars. Each time North Korea launches a missile it costs them an estimated $6 million per – that equates to about 700 missiles, almost certainly at least partially paid for by the EDD.

There is also one estimate that the entire North Korea nuclear weapons program has cost about $2 billion dollars – only half of what they could have gotten from the EDD –  though that does seem low.

While exact figures are impossible to come by, across the country unemployment agencies were looted for about $135 billion dollars, meaning that about 30% of the fraud was skimmed through California.  Even though California is the largest state by population, that percentage is double what could be expected when compared to national population percentages.

Even before the pandemic, North Korea was stealing billions every year around the world and they are still doing so, post-pandemic.

Of the money stolen through fraud, much of it came through the federal pandemic unemployment add-on program, as Julie Su – then in charge of the EDD and now acting federal Secretary of Labor – likes to say.  While that is technically true, a person could not just get federal money – they had to get state, too, and the EDD operated the “spigot” for both buckets of money, so Su’s argument is meaningless.

Of that overall $135 billion, experts say about 20% at least stayed in the United States: Rappers,  prisoners, 16-year-old kids on the dark web, unemployment agency employees, or anyone else who figured out how easy it was to steal got in on the act.

But most of the money – at least $100 billion – went overseas.  It went everywhere around the world and ended up in almost every country on the globe – the EDD actually sent pre-loaded unemployment chipless debit cards with up to $17,000 on them to addresses in foreign countries.

Seriously – sending a California unemployment debit card out of the country did not immediately raise red flags at the EDD.

But experts say the lion’s share of that money went three places: Russia, China, and North Korea.

Russian hackers got a large chunk of the overall haul, but that is technically not a sanctioned government program. Vladimir Putin has long made it clear that as long as Russian cybercriminals do not steal inside the country, they have a free hand.

China pulled in a large amount and considering the incomprehensibly intertwined nature of government and “private” and institutions there, calling that theft a specific government action is murky.

But North Korea has a specific government department called Office 39 that is in charge of cybercrime, money laundering, theft, and such. It’s as if the United States had a Department of Commerce, Department of Labor, Department of State, and a Department of Global Theft.

Prior to the pandemic, said cybersecurity expert Brett Johnson, it was estimated that at least one-third of North Korea’s weapons program was being funded with stolen and/or fake money.   –  hence the truly troubling certainty of where the EDD bonanza ended up.

But the pandemic literally threw open the doors to fraudsters around the globe and – despite early warning signs and pleas to government officials from experts like Johnson – Julie Su and other unemployment agency chiefs did not shut the door (depressing fact:  Su was made aware of the EDD problem a few weeks into the pandemic and was told there were ways to pay a few million dollars to “bolt on” an identity security program to even the practically steam-powered computers of the agency. She did nothing.)

Johnson said the problem will not stop just because the pandemic is over.  Those same criminals – realizing how easy government programs are to loot – have just shifted their target to programs like EBT and Federal Emergency Management Agency (FEMA) disaster relief.

“You can go on the dark web right now and pay $15 bucks to watch a tutorial that will tell you exactly what to type into a FEMA online form to get funds, typically about into the thousands of dollars. Each time you fill out the form,” Johnson said. “They are now very organized in going after government sites.”

So if the worst comes to pass and one day you look up and see a North Korean missile flying over your home, you can thank Julie Su and the EDD for helping to make that happen.

Golden State, meet Molten State.

The EDD did not respond to a request for comment, by their requested and extended deadline.