Cryptocurrency, Exchanges–A recent investigation published by The Wall Street Journal on Friday reports finding close to $100 million in illicit funds being funneled through cryptocurrency via crypto exchanges.
While the report details that at least 46 cryptocurrency exchanges were involved in the laundering of $88.6 million, the largest portion of stolen funds were reportedly sent via the multi-coin exchange Shapeshift. As a backdrop to the illegal movement of funds, the WSJ details the experience of a North Korean agent, a credit card thief and the benefactor of a widespread Ponzi scheme as relying upon Shapeshift for the laundering of funds. First founded in 2014 by long-time cryptocurrency figure Erik Voorhees, the exchange offers the anonymity prized in cryptocurrency that is not commonly found through other exchanges relying upon strenuous identification processes.
As Cointelegraph points out, Shapeshift transactions, while anonymous, are still traceable by authorities. However, the individual behind the trade is kept anonymous, thereby providing a secure means for moving money without being directly tied to the funds. The WSJ targeted Shapeshift as the likely source for crypto money laundering, and developed a program as apart of its investigation which tracked funds from over 2,500 illicit schemes, frauds and outright theft which involved the use of Bitcoin and Ethereum. The WSJ took advantage of Shapeshift’s published record of the most recent transactions, downloading the information into a list every 15 seconds to keep an adequate record.
According to the report, money launderers utilized Shapeshift en masse to convert Bitcoin into the anonymous and untraceable cryptocurrency Monero–a coin that has managed to rise to the top in terms of offering the securest form of inconspicuous digital tender. While the Wall Street Journal article implies that Shapeshift, on some level, was aware of the trafficking of millions of dollars worth of illicit funds, the company refused to change policies to a degree that would prevent such transactions. In addition, speaking with the WSJ over the matter of anonymous transactions and the potential they provide for illegal activity, founder Vorhees claims that the exchange should not change its service simply in response to a few bad actors,
“People should [not] have their identity recorded to catch an occasional criminal.”
Despite keeping tight to the continued offering of anonymous transactions, the article reports that Shapeshift did ban several addresses that were implicated in the investigation, with Chief Legal Officer Veronica McGregor telling the news outlet that the company would begin requiring user identification starting next month. McGregor also went on to contradict the earlier statement made by CEO Erik Vorhees, indicating there may be some clash between the company’s ability to operate in the current legal landscape and the ardent decentralizaed philosophy of its founder,
“just because it’s the personal philosophy of the CEO doesn’t mean that’s how the business is going to be run. He’s not pro-money-laundering.”
Vorhees has been an adamant proponent of both Bitcoin and cryptocurrency dating back to the early years of the industry. He is featured prominently in the cryptocurrency-based documentary Banking on Bitcoin.