On September 28, The Wall Street Journal reported that $88.6 million in ill-gotten money has been channeled through 46 crypto exchanges over the past two years. As per the report, $9 million of the illegal funds reportedly passed through a Switzerland-based cryptocurrency exchange ShapeShift.
Launched in 2014 by Erik Voorhees, ShapeShift, unlike other exchanges, lets users to anonymously trade Bitcoin. ShapeShift has, however, recently announced that it would adhere to KYC standards from the beginning of next month to save itself from a crackdown.
The investigation traced funds from over 2,500 wallets
The Wall Street’s investigation tracked illicit funds from over 2,500 suspected blackmail schemes, investment frauds, and other criminal activities. The journal partnered with London-based blockchain forensic startup Elliptic to track funds from Bitcoin wallets to exchanges. To analyze ShapeShift transactions, for instance, the Wall Street Journal downloaded and stored a list of the 50 newest transactions every 15 seconds and compared them to the wallet addresses of suspected exchange.
According to the report, criminals took advantage of ShapeShift’s transaction anonymity feature to convert ill-gotten bitcoin into a censorship-resistant cryptocurrency Monero. After the deadly WannaCry ransomware attack, wherein cybercriminals from South Korea obtained millions from businesses and governments, the WSJ’s investigation traced the illegally obtained bitcoin to the notorious ShapeShift. The exchange continued to launder ill-gotten funds even a year after the attack and didn’t bother to revise its policy as far as users’ anonymity is concerned.
The journal provided the exchange with all the suspected addresses, which were using the exchange. The chief legal officer at ShapeShift Veronica McGregor confirmed to WSJ that the company has reviewed the addresses and blacklisted them. She said the exchange will introduce ID requirements for traders and is also looking forward to complying with the current KYC and AML regulations. Even so, Veronica didn’t spare the WSJ report. She claimed the report’s facts were cherry-picked. Veronica boasted that the report only affected 0.2% of ShapeShift’s overall trade volume.