There has long been an allegation of cryptocurrencies facilitating money laundering - and one of the biggest arguments of states against this technology. A Wall Street Journal report from Friday now claims that over $88 Million has been laundered over the past two years across 46 cryptocurrency exchanges around the globe.
During the course of their investigation, the Wall Street Journal reporters tracked the transfer of funds from over 2,500 cryptocurrency wallets which were marked by the courts as having been involved in criminal activities. This investigation was carried out by the Wall Street Journal in alliance with London-based firm Elliptic, which deals in blockchain forensics. Together, the two traced the transfer of funds from wallets to exchanges.
ShapeShift AG Emerges As Launderers’ Favourite
One of the biggest names that appear in this report is that of ShapeShift AG, a cryptocurrency exchange that has been incorporated in Switzerland but operates out of the US, which has been around since 2014. Reportedly, $9 Million worth of funds have been laundered via just ShapeShift. Basically, ~10.22% of the total funds were laundered via just this one exchange. The report claims that ShapeShift was used by criminals to exchange their Bitcoins for Monero, which is an anonymity-focused cryptocurrency.
ShapeShift has been involved in similar controversies in the past too. Back when the WannaCry ransomware broke out, South Korean hackers funnelled millions of Bitcoins towards ShapeShift wallets. However, despite clear evidence that hackers were using their platform for laundering funds, ShapeShift did not introduce any policy changes even a year after the attack.
Apart from the WannaCry incident, the WSJ report points out that criminals who ran an ICO exit scam which raised ETH worth $2.2 Million ended up transferring $517,000 worth of funds to ShapeShift (and the rest went to South Asian cryptocurrency exchange KuCoin). The currency that was sent to ShapeShift was again converted into Monero.
Interestingly, ShapeShift had announced earlier this year that the platform is going to enforce KYC standards from the 1st of October to ‘de-risk’ the platform. The WSJ report comments on how ShapeShift CEO Eric Voorhees has taken a pro-anonymity stance on multiple occasions and has also stated his angst against the Anti-Money Laundering standards as well as KYC compliances in the past. The report further comments on ShapeShift, saying:
“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.”
ShapeShift CEO Refutes WSJ Report
ShapeShift CEO Eric Voorhees refuted the WSJ report, stating that these were ‘cherry-picked’ facts used against them and these laundered funds account for only 0.2% of ShapeShift’s total trading volume. In a statement on Twitter, the ShapeShift CEO commented:
“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%.”
Veronica McGregor, the chief legal advisor to ShapeShift, stressed on the fact that the company is working towards complying with the latest AML and KYC standards, and that the CEO is ‘not pro-money laundering’. The WSJ provided ShapeShift with the suspected wallet addresses and the exchange has since banned them all. Stay tuned with us at Cryptoground for all the latest updates from the world of cryptocurrencies as well as the blockchain technology.