Source: The Block
Crypto exchange eXch announced that it will shut down on May 1 after learning that a “transatlantic operation” was investigating the project for money laundering and terrorism.
There have been reports that the platform was used as a tool for money laundering by North Korea’s Lazarus group, involving cryptocurrencies stolen from Bybit.
eXch expressed regret that its privacy-oriented approach had been misunderstood.
eXch officially announced that it had decided to cease operations on May 1 due to being accused of being a cryptocurrency money laundering portal for the North Korean Lazarus organization. The exchange said it recently learned that it had become the target of an active "transatlantic operation" aimed at shutting down the platform and prosecuting the team.
Under intense scrutiny, most team members voted to "cease operations." eXch said: "It makes no sense to operate in a hostile environment, and we became a target of signals intelligence simply because some people misunderstood our objectives."
Multiple on-chain analysts previously claimed that eXch was used by the Lazarus group to mix and mask the origin of more than $1 billion in Ethereum stolen from Bybit on February 22.
“[eXch] has seen an unusual surge in Ethereum volume — 20,000 ETH in the last 24 hours, compared to the usual 800 ETH,” blockchain analyst vxdb wrote on X. “Their Bitcoin reserves are also empty, but their Ethereum reserves are up 900%,” he added.
The KYC-free exchange has denied the allegations, saying: “We do not launder money for Lazarus/DPRK.” eXch wrote in a previous forum post: “Views to the contrary are simply those of some who wish the fungibility of decentralized currencies and on-chain privacy would go away… They are long-time haters of decentralized cryptocurrencies.”
In its latest announcement, eXch did not deny the presence of illicit funds associated with Lazarus on the platform, but said: “We have absolutely no intention to facilitate illegal activities such as money laundering or terrorism, which is what we are currently accused of.”
Decentralization and Privacy
The North Korea-backed Bybit hack has sparked discussion among crypto protocols and peer-to-peer traders about whether the belief in preserving decentralization by refusing to block illicit funds is correct.
Following the Bybit hack, cross-chain decentralized exchange Chainflip temporarily halted its front-end exchange platform due to concerns that deploying upgrades to prevent hackers from using the platform could affect its decentralization.
THORChain, a cross-chain liquidity protocol, also debated internally on a proposal to block Lazarus funds, but ultimately decided not to take those steps.
TCB, a core contributor to the protocol, also left the platform as a result. He wrote: "The idea of decentralization is just an idea. When most of your liquidity is stolen funds from North Korea, involved in the largest theft in human history, it becomes a national security issue. This is no longer a game."
Meanwhile, in an announcement on Thursday, eXch criticized projects that block funds from certain users of the platform, citing a “misunderstanding” of anti-money laundering, while praising THORChain and other privacy-oriented projects for not “betraying” their mission.
“Any instant exchange that screens customer deposits through a third-party API and resorts to meaningless AML/KYC clauses is far from preventing money laundering and terrorism,” eXch said. The exchange also said that if the project is serious about anti-money laundering, it should “stop hiding” behind offshore entities and conduct rigorous due diligence on each customer. It also mentioned that even after its closure, illegal actors will still find ways to launder money.
“Privacy is not a crime,” eXch said.
While eXch’s announcement broadly lamented the failure of its privacy-oriented vision to combat what it considers ineffective anti-money laundering measures, it did not propose any alternative solutions to the problems of hacking and illicit fund transfers that continue to plague the crypto industry.
