WSJ: Cryptocurrency Exchanges Used to Launder Around $90 Million In Last Two Years

The Wall Street Journal published a report on Friday uncovering the dark side of the crypto industry. As per the publication, that nearly $90 million have been laundered through 46 cryptocurrency exchanges in the last two years.

The Journal’s investigative report is based on the funds traced from 2500 wallets flagged by the courts for their involvement in criminal activities. For this report, WSJ partnered with Elliptic, a London-based forensic company who helped to trace funds from wallets to the crypto exchanges. The Journal is also said to have cross-verified the suspicious intermediary portfolios with the wallet addresses of the suspected cryptocurrency exchanges.

In the report, ShapeShift AG has been named as one of the largest recipients of illicit funds. The report notes that ShapeShift was "the largest recipient of the funds with a U.S. presence,” although it holds a registered office in Switzerland. Out of the total $88.6 million laundered, ShapeShift alone contributes about $9 million.

The timing of the report is quite interesting considering that ShapeShift is all prepared to implement the KYC standards from the 1st of October to “de-risk” itself. The report further highlighted ShapeShift CEO Eric Voorhees for the anonymous operations of the exchange. It also cited Eric’s previous views against AML laws which makes it mandatory for exchanges to implement KYC in order to keep a trace of the funds movement. It helps to keep a check on the illicit activities of money laundering.

The Journal also cites references from security researchers as evidence to prove that criminals used that ShapeShift exchange to convert Ethereum tokens to Monero. Investigation done post the WannaCry ransomeware attack traced the extorted BTC to the ShapeShift exchange. However, post one year after that attack the exchange didn't bring any change to its policy as criminals continued to launder funds which later became untraceable.

The report’s authors wrote: “Even spoofers who robbed ShapeShift’s own would-be customers by setting up a copycat ShapeShift website that stole their money used the real ShapeShift to launder their funds.”

However, as expected, the WSJ report received a sharp criticism from Voorhees saying that the facts are cherry-picked and half-baked. On his official Twitter account, Voorhees wrote: “We are aware of the poorly-researched piece written against us by someone at WSJ. The implications are disingenuous and misleading. Author cherry-picked data, excluding facts contrary to vilification narrative. $9m figure is less than 0.2% of our volume over the time-period. Meanwhile global money laundering through banks is 2-5%.”