Binance, the world’s largest cryptocurrency exchange, has processed transactions totaling at least $2.35 billion stemming from hacks, investment frauds and illegal drug sales, according to a Reuters investigation, published Monday. The data provided by Amsterdam-based analysis firm Crystal Blockchain showed that from 2017 to 2022 buyers and sellers on the world’s largest darknet drugs market, a Russian-language site called Hydra, used the exchange to make and receive payments worth $780 million.
Additionally, the German police said investigators began seeing criminals in Europe turn to Binance in 2020 to launder some of the proceeds from investment fraud schemes that caused victims, many of them pensioners, to lose a total of $750 million euros ($800 million).
The flow of illicit funds through the exchange represents a very small portion of Binance’s overall trading volume (over $9.5 trillion in 2021 according to The Block) but is still significant as regulators and policymakers, including U.S. Treasury Secretary Janet Yellen and European Central Bank President Christine Lagarde, raise concerns over the illegal use of cryptocurrencies. The FTC last week reported that more than $1 billion had been illicitly obtained from crypto fraud and scams between January 2021 and March 2022.
Reuters has also revealed for the first time how North Korea’s hacking group Lazarus, which allegedly helps fund Pyongyang’s nuclear weapons program, used Binance to launder some $5.4 million of cryptocurrency stolen in September 2020 from Slovakian crypto exchange Eterbase. In January, Reuters reported that Binance has kept weak money-laundering checks on its users until mid-2021 despite concerns raised by senior company officials.
Binance’s chief communications officer Patrick Hillmann told Reuters in an email that Binance did not consider the news outlet’s calculation to be accurate. Hillmann reportedly said that the exchange uses transaction monitoring and risk assessments to “ensure that any illegal funds are tracked, frozen, recovered and/or returned to their rightful owner” and is working closely with law enforcement to disrupt criminal networks using cryptocurrencies, including in Russia.
In a statement to Forbes, Binance has called the report a “woefully misinformed op-ed that uses outdated information from 2019 and unverified personal attestations.” “The fact is that Binance has some of the strictest AML policies in the fintech industry and plays a significant leadership role in helping law enforcement deal with cyber and financial crime. Since the article ran, we have received an outpouring of support from partners in law enforcement across the globe,” a Binance spokesperson said.
Editor’s note: the story and headline were updated to reflect Binance’s response.
Binance, the world’s largest cryptocurrency exchange by volume, has disputed claims that it has acted as a vehicle for the laundering of at least $2.35 billion in illicit funds.
- A Reuters report claimed that Binance has become a “hub for hackers, fraudsters and drug traffickers” with strong links to Russia-based dark web market Hydra.
- Matthew Price, Binance’s senior director of investigations who was the lead investigator on Hydra when he worked at the IRS criminal investigation, told CoinDesk: “What I think is very skewed in this report is that every exchange has exposure to dark net markets.”
- Tigran Gambaryan, the exchange’s global head of intelligence who also worked at the IRS’ cyber crimes unit, added: “It’s something that completely disregards facts to get an agenda across.”
- “The biggest part of this story is completely ignored. You can’t control deposits, you can only control what you can do afterwards,” Gambaryan added.
- Price and Gambaryan said that Binance has a stringent process in place that handles exposure to fraud, dark net markets and scams using blockchain analytics software provided by Chainalysis and Elliptic.
- “There is a system in place. We do have risk scoring for everything you can think of. We have everything tagged internally based on our tools, then we are able to do post-transaction monitoring with Chainalysis,” Gambaryan noted.
- Binance published 50 pages of email exchanges between its intelligence team and Reuters, in which it comments on recovering $5.8 million from the Ronin hack, as well as its assistance in multiple fraud cases.
- The email exchange reiterates that the reporter was confusing “indirect” exposure to dark net markets and “direct exposure.”
- Data from Chainalysis reveals that 0.15% of all cryptocurrency transactions in 2021 were associated with illicit activity, while the U.N. estimates that between 2% and 5% of fiat currency is linked to some form of criminal activity.
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