WSJ Looks at Money Laundering in Crypto, ShapeShift CEO Pushes Back

WSJ Looks at Money Laundering in Crypto, ShapeShift CEO Pushes Back

In a new Wall Street Journal report entitled “How Dirty Money Disappears Into the Black Hole of Cryptocurrency,” two Journal reporters examined criminal money laundering in the cryptocurrency ecosystem, specifically honing in on cybercriminals’ alleged use of ShapeShift in America’s nook of the cryptoverse. ShapeShift chief operating officer Erik Voorhees has since contested the report, calling it “poorly researched.”

Update 10/1/18: ShapeShift’s Erik Voorhees has published an op-ed challenging virtually every aspect of WSJ’s report.

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WSJ Report: ‘A Parade of Suspected Criminals’ Have Used ShapeShift

The report, subtitled as an investigation into “suspicious trades through venture capital-backed ShapeShift,” tracked suspected criminal money laundering incidents through 46 popular cryptocurrency exchanges, particularly focusing on three unrelated criminal groups’ suspected use of ShapeShift.

“A parade of suspected criminals has taken advantage of ShapeShift’s services since the exchange began in 2014, according to law-enforcement officials, independent researchers and the Journal’s investigation,” WSJ‘s Justin Scheck and Shane Shifflett wrote.

WSJ shines a light on suspected criminal money laundering in the crypto ecosystem.

The duo began by highlighting ShapeShift’s “U.S. presence,” and, through that specter, examined how a series of cybercriminals have seemingly used the exchange as a redoubt in recent times for “cleaning” illicitly-gained digital assets.

Specifically, and among others, the Journal pointed out that North Korea’s WannaCry ransomers, Starscape Capital’s exit scammers, and Centra Tech Inc.’s alleged crypto debit card fraudsters had all transferred funds through ShapeShift at various points.

The Numbers, and a Reach-Out

Examining a two-year span, the Journal tracked $88.6 million USD in suspected criminal launderings in the cryptoverse, with the outlet pegging ShapeShift as facilitating “nearly $9 million of the suspect funds.”

The Journal, which said the report examined only a “narrow slice of suspected criminal behavior” in the space, said that it traced the funds in question through as many as 46 cryptocurrency exchanges.

Scheck and Shifflett also noted that WSJ had reached out to ShapeShift with some of its findings, which the duo reports prompted regulatory action from the exchange:

“The Journal provided ShapeShift with a list of the suspicious addresses it found using the exchange. In response, Veronica McGregor, who joined ShapeShift last month as its chief legal officer, said the company reviewed those addresses and banned them from using the exchange.”

The report comes on the heels of the previously account-less ShapeShift recently announcing a shift toward accounts and the “Know Your Customer” rules that dynamic comes with, a de-risking maneuver.

In arriving at their analysis, the Journal downloaded ShapeShift’s most recent transactions “every 15 seconds” and then checked these transactions against compiled lists of suspicious digital wallets.

Not Backing Down, Voorhees Calls the Report ‘Poorly Researched’

Shortly after the WSJ report was released, ShapeShift chief operating officer Erik Voorhees pushed back on the article’s thrust, suggesting it was a false narrativization that was “poorly researched” and “misleading.”

Voorhees declared that his team would be working on an op-ed to counter the Journal’s reporting, saying the “$9m figure is less than 0.2% of our volume over the time-period. Meanwhile global money laundering through banks is 2-5%.”

Voorhees’s crux, of course, was that the “cherry-picked data” honed in on an insignificant fraction of ShapeShift’s overall business operations, suggesting that such laundering was unavoidable here and there in banking-like systems in general, crypto or not.

“[Erik’s] not pro-money-laundering,” recently hired ShapeShift chief legal officer Veronica McGregor commented to the Journal.

While the aforementioned op-ed is forthcoming, Voorhees did not immediately respond to Bitsonline‘s request for comment on what WSJ‘s report represents for the crypytoverse. We will update this article immediately if he chooses to do so.

What’s your take? Is some extent of money laundering unavoidable in any financial system? Does ShapeShift deserve slack or criticism here? Let us know in the comments section below. 


Images via Pixabay

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