The events that prompted the closure are outlined by Syed Rahman
The exchange eXch has announced that it will shut down on May 1 after claims that it was used to launder funds by those involved in the $1.5 billion Bybit hack.
In a notice on the Bitcoin Forum, those who run eXch say it has become the target of what they call a “transatlantic operation” that aims to shut it down and possibly prosecute some of its key people for money laundering and terrorism. They claim they were tipped off that it was being investigated regarding the laundering of cryptoassets.
The Czech-based exchange, which was known for minimal know-your-customer requirements, stated that it had been created as a privacy experiment, had no financial goals and never intended to facilitate illicit activity. It has emphasised that it was a privacy-focused instant exchange rather than a traditional coin mixer.
eXch had denied accusations that it laundered funds from those who hacked Bybit, who are reported to be the North Korean Lazarus Group. But it later admitted to processing a “small portion” of the funds from the hack, which was carried out in February.
A number of blockchain analytics firms had pointed to eXch as playing a role in the laundering process after the attack on Bybit. The Lazarus Group has been accused of using a web of decentralised exchanges, cross-chain bridges and privacy tools - including eXch - to hide the proceeds of the hack.
In announcing its shutdown, eXch criticised centralised exchanges for their “nonsensical policies” that fail to prevent money laundering and argued that its closure would not eradicate illicit crypto activity. It also said it was creating a 50 Bitcoin fund to assist open-source, privacy-enhancing projects in the Bitcoin and Ethereum ecosystems.
If there is a lesson to be learnt here, it is that regulators are beginning to scrutinise crypto mixing services with a greater intensity. Other crypto mixers such as Tornado Cash, Bitcoin Fog and Helix have either been shut down or have faced strong regulatory scrutiny and action.
Crypto mixers may argue that privacy should not be a crime. But their involvement in facilitating illicit payments is undeniable - and money laundering through digital assets is becoming an epidemic. Crypto mixers will have to adapt should they wish to operate legitimately in the future.
