Bitcoin Forum

I thought that this might be good job on investigative journalism and a confirmation of the theory that exchanges are part of a global money laundering ring. However, again, when I read where this report was based from, the skeptical me thought that this was only another paid for advertisment from the corrupt world of bitcoin news media as usual.

https://blog.chainalysis.com/reports/money-laundering-cryptocurrency-2019

https://i.ibb.co/Mscz6JW/AEA07782-D4-D1-4734-B7-ED-A0-FFDB561663.jpg

Blockchain analytics firm Chainalysis said Wednesday that it traced $2.8 billion in Bitcoin being sent by criminals to crypto exchanges in 2019, with the bulk of those transactions going to Binance and Huobi.

"While exchanges have always been a popular off-ramp for illicit cryptocurrency, they’ve taken in a steadily growing share since the beginning of 2019. Over the course of the entire year, we traced $2.8 billion in Bitcoin that moved from criminal entities to exchanges," Chainalysis noted, with 27.5% of that amount going to Binance and 24.7% going to Huobi.

On the two exchanges, a small group of accounts that received more than $100 billion worth of BTC in 2019 took in most of the illicit funds, Chainalysis found. 75% of the total amount received on Huobi and Binance went to 810 of the highest-receiving accounts.

"Overall, just over 300,000 individual accounts at Binance and Huobi received Bitcoin from criminal sources in 2019," Chainalysis noted.

According to the analytics firm, these large accounts likely belong to over-the-counter (OTC) brokers that "are typically associated with an exchange but operate independently."

Although Huobi and Binance both have Know-Your-Customer (KYC) procedures in place, such requirements are lower for OTC desks, hence the existence on the two exchanges of some OTC desks that specialize in providing money-laundering service to criminals, Chainalysis claimed.

Read in full https://www.theblockcrypto.com/linked/53138/chainalysis-traced-2-8-billion-in-bitcoin-being-sent-to-crypto-exchanges-by-criminals-last-year

I am for fighting crimes in whatever form and type and certainly the cryptocurrency industry will never achieve its full potential if we are allowing criminals to have their cakes and eat them too. However, as of now, I am now aware of any mechanism put up to fight cryptocurrency related crimes that uses legitimate cryptocurrency exchanges. Maybe there must be that body that will be alerting these exchanges maybe to freeze the digital assets once they reached their respective platforms. We already have the technology that can trace the transactions but this information is nothing if no action can be take out of them. This can be a good ground why we must have a comprehensive strategy in fighting the many crimes using cryptocurrencies and that strategy should be heavily involving the very exchanges where these assets can be sold off and be converted to the fiat money.

@CryptoBry. You want to give exchanges your permission to freeze your accounts anytime someone else decides that you are a criminal? Yes it can be used against us.

Also, I am not on a level to say who is bad or good, however, taking crime use away from bitcoin will take away one of its important applications.

Isn't Binance a client of Chainalysis? This is posted on Binance's website (https://www.binance.com/en/blog/277733645433167872/Binances-AMLKYC-Partners):


Throwing their client under the bus and making themselves look bad. Good work, Chainalysis. ::)

This should come as no surprise to anyone, it is normal. Even banks go through this kind of thing. What I can not understand is what is the purpose of this report? show that exchanges are money laundering targets? Why is this something already predictable and something that happens even to banks or want to show that the value involved in money laundering in the case of exchanges is very or little relative to banks? Anyway I am not surprised by this report

Nothing new and non a surprising thing for exchangers to be tagged up with money laundering or any other illegal
transactions towards those coins being sent out on the platforms. Exchanges, mixers or even gambling sites are
always open to be used as a medium.

Thats what you called excellent service.  8)

Money laundering is a broad term. Therefore, many reports do not explain exactly what their definition of money laundering is, is it tax evasion, dark activities, or lack of compliance with financial legislation.

It is a broad term, but that's something no regulator wants to explain in-depth. It's much easier to prosecute people like this because they do not know what they are being accused of exactly, but they do know that they are in deep troubles. I think that most people will not dig deeper themselves but just accept whatever they are subjected to.  :-\

It shouldn't come as a surprise anymore that whenever there is something shady going on, Huobi's name always pops up very high on the list. Huobi and OKEx were also the exchanges where BSV pumped hard on most likely fake volume, all to create liquidity to sell into. No shortage of shady activity.

Well, that's why we have courts! You can always use them if you believe your funds were locked away unfairly...  Plus make a good return over investment by suing the exchange iyam...


You should read Satoshi's whitepaper again, It's supposed to be a currency and like all currencies, it is susceptible to Money Laundering. I don't know why people only see Money Laundering as the only "application" of Bitcoin. What about it being a medium to transfer wealth swiftly without having to pay extortionist fees in the process?


Exactly! The report doesn't even clarifies how it ^{( Chainalyisis )} identifies "illicit-activities", what are these? Ransomware funds, Black money? etc... Chainalyisis is mute on this...

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So basically what Binance is saying that the "local jurisdiction / Regulations" allow people to launder money if they are smart enough? Is this what it indirectly means? LOL...

Did they just quoted themselves on their own news article? I know this came from their website but with how sloppy they are making the report it makes them look like unworthy of making them as a reliable source. If indeed these tainted coins are being transported in and out of Huobi and Binance I think that big of an amount and how the authorities can now catch up with them will show us if what they are saying is really true. Both exchanges are always in a crackdown or under the givernment's microscope so I wouldn't think that if they are laundering money it will be that high.

Yes, they quoted themselves. And yes, they've definitely gone in over their own heads in the past, according to this whistleblower (https://news.bitcoin.com/chainalysis-whistleblower-shares-company-secrets-in-explosive-ama/) who said about mixers (which you might say exchanges partially do):
"Things like that destroy the need for our/their software. It can make the software completely irrelevant.”

They're shameless, but then, when they've got big contracts with big states, hey, you gotta be shameless.

I think that I'm getting your point. A forensic crypto tech company using other tactics to try and destroy mixers and exchanges because even their software cannot track what they are doing. It's like them admitting that their software is useless and what they will do next is have a black propaganda against these services who have proven to do more good rather than evil. The sad thing about this is since they are tied up to the government I can consider them as an untouchable and also a threat to these kinds of services, they can also feed false information to the government to have a favorable law for them.

The courts are there, however, that does not entirely help the user, it only gives us false security to enable them.

Also, I was only talking about bitcoin's application as a neutral form of currency. It should be used by everyone including criminals. It should bank the unbanked, however, it appears it has been better in unbanking the banked hehehehe.

Agree to disagree...


Well if you take into account the bigger picture, bitcoin's percentage comes out as pretty insignificant. According to the IMF, around $600 billion to $1.5 trillion of illicit money is laundered annually.^[1] (https://en.wikipedia.org/wiki/Offshore_bank) Given these figures are accurate, Bitcoin's usage for illicit purposes turns out to be mere 0.46% and less in the bigger picture. The way I see it, it looks like the banks and local regulations are helping the banked become unbanked ::)

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Source:
[1] https://en.wikipedia.org/wiki/Offshore_bank , https://www.imf.org/external/pubs/ft/fandd/2018/12/imf-anti-money-laundering-and-economic-stability-straight.htm

@Thekool1s. Agreed, however, I was not talking about the bigger picture. I was only calling attention on how bitcoin might be tamed by the regulators instead of regulators tamed by bitcoin.

Fair enough... From the way I see it and what the Estimates suggest it looks like the regulators are already tamed by the unbanked  ;) We have got nothing to worry about for now at least...

This is true if this community really wants to embrace bitcoin's application to bank the unbanked. Elon Musk did not consider how regulators are making up for lost time, however. Criminals might have moved from bitcoin to anonymous altcoins.


Tesla CEO Elon Musk is clarifying his thoughts on Bitcoin (BTC) and cryptocurrency. In a new interview on the Third Row Tesla Podcast, Musk says he’s neither an advocate nor a critic of the emerging technology.

“I’m neither here nor there on Bitcoin… I thought [the Bitcoin whitepaper] was pretty clever.”

Musk says crypto supporters should acknowledge a hot button issue – that digital assets are used for illicit as well as legitimate purposes.

Source https://dailyhodl.com/2020/01/23/tesla-ceo-elon-musk-blasts-the-one-thing-that-gets-crypto-people-angry/

Well blow me down with a feather. Luckily Steven Mnuchin or whatever he's called said outright that the dollar is NEVER used for money laundering so it's got to go somewhere. It's very considerate of criminals to leave it alone. Nice guys.

@gentlemand IKR! I can't believe Elon actually said this... How can he give such naive statements? Does he know 80% of cash (https://edition.cnn.com/2017/06/26/health/atm-dirty-cash-partner/index.html) carries traces of cocaine? Why aren't the FIAT supporters acknowledging that their dirty creation is being used for dirty illicit purposes?  ::) Some times Elon makes me wonder whether he is Steve jobs or Steve Wozniak.

@Thekool1s. The fiat supporters do not care because they do not treat their currency similar to a religion. Elon Musk was correct by telling us that we should acknowledge cryptocoin technology for illegal purposes. I reckon that we should embrace it.

However, we might have lost our motivation for disruption and replaced it with want of legitimization and regulation because it might pump the price.

Lol, You can't be serious! Anything can be used for illegal purposes. It's like saying the smartphone companies should embrace the fact that their cell phones are used during/planning robberies, they should do something about it by placing filters on some words like a getaway driver etc. So that robberies can be prevented. Do you see how insane your argument sounds? Illegal activities are a human problem, not a currency problem.

P.S By fiat supporters i meant the banks themselves  ::)

Yes, you are making a similar argument as me that we should acknowledge and embrace bitcoin's use by criminals. It is a part of what gives its value. Good on us hehehe.

In any case, part of my criticism is to those people who shout for no regulation and freedom, however, shout for the SEC to catch ICOs because they are unregulated and illegal securities.

Those are probably the dumb herd just following a bunch of "gurus" where one of them preaches total freedom, and the other preaches how important regulators are and how they can help legitimize this space. I wouldn't pay attention to those because they're here just to see their bags pump and shout BULL RUN or ALT SEASON whenever they see the price increase by a few %.

I rather focus on those who build cool and useful tools/services, and they are either for or against regulations, not a blend of both. Fewer regulations is always preferred of course, but we know that's not possible within a space that's enabling trustless value movement and storage.

In all honesty, I take my hat off to the platforms playing this game by the rules. They are attracting new capital. No or not significant enough capital enters through crappy exchanges such as Hitbtc, Huobi, OKEx, etc. Coinbase, Bitstamp, Kraken, Gemini, etc those are the exchanges allowing this space to welcome new capital.

If the SEC was serious about preventing crime, then they should have allowed cryptocurrencies and their derivatives to be traded in NASDAQ and other exchanges. They have rejected the ETF proposal multiple times and this has forced the ordinary users to rely on shady exchanges. Also, the SEC has made it mandatory for the crypto-exchanges to conduct KYC of the users. If someone wants to exchange his $10 worth of bounty, he needs to undergo KYC. But the ICO promoters don't have to go through all these. They would just launch their ICOs from some country where it is not regulated and once they collect enough funds, they will vanish with all of that.

@bryant.coleman. I do not understand why listing some cryptocoins in the Nasdaq would stop scammers from scamming.

Also, do you support strict KYC on users? Exchanges that make it very hard on users to buy and sell coins might slow down adoption.

It won't stop the scammers from scamming. But if that occurs in NASDAQ, then the authorities can't give the usual excuse of not taking action against the criminals (the incident occurred at a jurisdiction, which is outside their area of operations). Scams would still occur, but the scammers won't be able to go scot free.

And secondly, as I pointed out I don't support KYC for exchange users. I have faced a lot of difficulty due to this. A few years back, I used to own several smaller altcoins and tokens and many of these tokens were listed only in one or two minor exchanges. I had to undergo KYC process at least a dozen times for several exchanges. In the end, I made the decision that enough is enough, and I should refuse KYC if any exchange demands it.

It is neither safe nor convenient to undergo the KYC process, just for selling your $10 worth of bounty. But I want the ICO promoters to undergo KYC.

There's much more you can do with a mobile phone than robberies.
https://cdn.hswstatic.com/gif/ied-2.jpg

If they know the coins were transferred there it should be easy to find usernames and IPs. One one hand I support anonymity, but I also believe that if there's no doubt that your client is a thief you should deny him service and send the money back to the people he stole from. I support social justice not government-imposed justice.

Very few cases will have "no doubt." According to Chainalysis, stolen bitcoins are usually moved through mixers/coinjoins and sold through OTC brokers before they ever land on exchanges. Huobi and Binance have no right to steal such bitcoins from their clients and distribute them back to victims. It would be very troubling if exchanges proclaimed themselves to be arbiters in these matters.

@squatter exactly, plus why would they want to put their reputation on the line? One small hiccup up and their reputation goes down the drain not to mention the time and money spent in verifying the claims of the victim economically don't make sense. Unless they'd want the victims to become their customers which again won't put them in a good light. I strongly believe if you want to prevent Scams then put your time and money in educating people. Something like Coinbase's earn program if you really have good intentions of helping people. Simply put, Prevention is better than cure.

Agreed. Scams would still occur, however, the people who run and play the Nasdaq, New York Stock Exchange, Wall Street are the old breed of scammers. The type of scammers that would convince the government steal their citizens' retirement money to give to them for them to play in the derivatives market similar to 2007 and 2008 hehehehehe.

I was thinking about this particular piece of news for the last few days.. and then something came to my mind. Binance doesn't require KYC for its users, if their daily transaction volume is less than BTC2.00 (someone please correct me if I am wrong). Obviously a lot of the governments are not happy with this. The US authorities even forced Binance to block users from that country (the US users were moved to a KYC-enabled platform recently). Now I don't support criminals using Binance or Huobi to launder their booty. But what I don't want is the government using it as an excuse to force KYC on some bounty hunter, who is looking to sell his $5 worth of tokens that he received from the campaign.

$2.8 billion looks huge, but keep in mind on a Global scale involving hundreds of players it is just a few drops in the big-time financial bucket.

more than that, the number itself is inflated. if you read through their methodology, so much of it is based on unproven heuristics. they are making assumptions about peel chains many, many hops out. they assume that mixed/coinjoined outputs that ended up at [OTC broker--->huobi/binance] were automatically the "illicit" funds they were attempting to follow. the list goes on.

what this boils down to is chainalysis talking a bunch of shit, and hyping up their blockchain analysis capabilities.

It might be inflated numbers, however, we should know that Chainalysis is not to be underestimated. The blockchain data they collect can be given to the government to use against you.



It started with a $9,000 data software contract for the FBI in 2015.

But just five years later, Chainalysis is now the cryptocurrency-tracing equivalent of Palantir, the data analytics company flush with lucrative government software contracts. Chainalysis is, right now, doing millions of dollars worth of business each year with the U.S. government, dwarfing its competitors in the young industry of blockchain surveillance.

The company is by far Uncle Sam’s leading crypto analysis contractor by spending and has become the go-to firm for 10 federal agencies, departments and bureaus.

Read in full https://www.coindesk.com/inside-chainalysis-multimillion-dollar-relationship-with-the-us-government

Yes... it is like a needle in the haystack. But the problem here is that most of the financial crime is being done by big banks and they have lobbyists in every powerful position in the government. So the government authorities may hesitate to touch them. Did you heard about the scandal involving the HSBC bank and the Mexican drug cartels? There was a lot of hue and cry initially, but everything was hushed up in little time. Bitcoiners are easy targets, since they don't have collective bargaining power.

Why would they touch them? It's an easy income source for the government, and one that's recurring as well because you know that the profits made by banks are far higher than whatever they end up paying in fines. Governments happy because they receive hundreds of millions in fines, and the banks happy because their profits are largely still there.

If governments were genuine, they would increase their fines to such degree that the profits made by banks would not only be nullified, but the bank actually loses hundreds of millions. The current system is set up strictly to enrich the government and allow high level money laundering to take place because they get a slice of the pie.

@bryant.coleman. $2.8 billion might be small compared to the global scale of the total on financial crimes, however, it is continuing to grow in the cryptospace. Darknet revenues were up 100% according to another report by Chainalysis.