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Probe into Crypto Money Laundering Industry

How to ensure the security of crypto assets in exchanges has long been a hot issue in blockchain industry as KYC data leak or assets stolen frequently occur. We can’t ignore the issue that how do those stolen crypto assets be laundered.

By Boss of Decentralized Crypto Exchanges

It is not inconceivable to launder cryptocurrency through centralized exchanges as long as sufficient benefits are given. Bitcoin Security Team WIZSEC obtained the flow chart of Bitcoin after analyzing the data on chain and the wallet address of Mt. Gox. The flow chart showed most of the stolen bitcoins (about 410,000) flowed to an exchange called BTC-e. And there is a user nicknamed “WME” (red line in the chart) who appears many times and acts as a middleman.


In July 2017, Vinnik, who was believed to be the operator of BTC-e, was arrested in Greece. All kinds of information indicate that Vinnik is “WME”. It is obvious that Vinnik , boss of the decentralized exchange played the role as an intermediary.

Because of the large number of wallets, funds, and frequent circulation  of hot wallet funds. Illegally obtained cryptocurrencies can be easily laundered in crypto exchange.

If the exchange does not carry out KYC validation, then this situation will be worsen. Assuming that the exchange carries out KYC validation, users can also split large deal into several small deals, after several transfers mixed security funds and finally transfer it to the exchange for laundering.

By OTC Transaction

Because most people lack the ability to monitor the origin of tokens and most of the mainstream currencies are homogeneous, a large number of currencies are  laundered OTC.

In the OTC market of cryptocurrency, a business of discounted purchasing for stolen cryptocurrency exists. The buyers purchase at a price below the market price, then clean it up and sells it at the market price to earn the difference.

Early crypto exchanges were not as developed as they are now. Many investors bought and sold Bitcoins mostly through OTC transactions. Even though in-the-field trading is now perfect enough, OTC transaction is still an important part of cryptocurrency trading due to the depth and privacy of the exchange.

The security has always been a issue that can not be ignored. At present, the emergence of security problems seems inevitable, so how to solve them more properly after the emergence is what we should think about. Everyone should avoid participating in the process of “money laundering”.

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