$88 Million Laundered Through Crypto Exchanges

According to a recent Wall Street Journal (WSJ) investigation published on Friday, about $88.6 million has been laundered using 46 different cryptocurrency exchanges.

Modus Operandi of the Investigation

WSJ reported that to be able to conduct this investigation, the agency created a computer program that could track funds from more than 2,500 crypto wallet addresses. These address were suspected of criminal activity such as investment fraud, blackmail as well as other illicit actions.

Then, funds from these accounts were traced to exchanges. WSJ said that reporters were able to track transactions to exchanges such as ShapeShift and KuCoin through the Ethereum and Bitcoin networks.

Largest Amount Laundered through ShapeShift

Of the total amount discovered through this investigation, $9 million was laundered through the Swiss crypto exchange founded by Eric Voorhees, ShapeShift.

This digital trading platform was established in 2014 and, unlike other crypto exchanges, allows users to trade in Bitcoin anonymously. While the police can track the transactions, they cannot identify the users who conducted those transactions. Even though the exchange is registered in Switzerland, it operates in the state of Colorado in the US.

WSJ reporters teamed up with ShapeShift and provided the exchange with a list of suspicious addresses which the exchange then started tracking. This involved downloading and storing 50 of the latest transactions from these addresses every 15 seconds on ShapeShift’s website.

One of the revelations of this investigation was that money-launderers were able to take advantage of ShapeShift’s anonymity policy and convert about $517,000 worth of ETH (Ether) into anonymity friendly crypto Monero, after which the money trail ended.

Voorhees reportedly told WSJ reporters that he did not think that people needed to have their identity recorded just because of a few occasional criminals. He made this statement despite the fact that millions of dollars in fraudulent money was being laundered through his exchange.

Making Changes

Despite Voorhees’ comments, the chief legal officer of ShapeShift, Veronica McGregor, stated that the exchange had reviewed the list of accounts provided by WSJ and had banned those accounts from their exchange. McGregor also stated that starting October 1, customers would need to provide identification data in accordance with KYC (Know Your Customer) policies.

The chief legal officer also stated that this move by the exchange to impose KYC policies was not due to any outside regulatory pressure but rather because they wanted to “de-risk” the exchange.

When she was asked about Voorhees’ comments about anonymity, McGregor stated that just because their Chief Executive Officer’s personal philosophy was such did not mean the business would be run that way. She stated that Voorhees was also against money laundering.