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Cryptocurrencies worth millions of US dollars have been sent to centralized exchanges (CEX), particularly Binance, from wallets providing funds to support Russia’s war effort in Ukraine, transaction data suggests. According to Ukrainian analysts, the money was transferred to the crypto trading platforms to be laundered.
More than $40 million was sent last year from wallets used to sponsor the Russian invasion of Ukraine to cryptocurrency exchanges, according to an analysis of such transactions by Hapi Labs. The main purpose of these transfers was to launder the money, claims the Ukrainian start-up in a mail on Twitter published Tuesday.
While varying amounts went to a variety of crypto platforms, nearly 96% of the digital cash reached Binance, the world’s largest cryptocurrency exchange. Researchers at the company, which provides blockchain tracking tools and data analysis software, believe this is indicative of a failure in its anti-money laundering (AML) procedures.
At the same time, amounts transferred in the opposite direction – from exchanges to wallets used to support the Russian war on Ukraine – are much more modest, the developers of decentralized security protocols pointed out.
“Binance is still among the leaders, but as we can see, it’s not the only one. Say hello to the bankrupt @FTX_Official and others!” they said in another tweet.Two other major centralized exchanges, Kucoin and European, Ukraine-based Whitebit, are also in the top five, along with decentralized aggregator 1inch.
Hapi Labs tracked donations of weapons and ammunition intended for the Russian army and various private military companies, including groups associated with the two Russia-backed self-proclaimed republics in the Donetsk and Luhansk regions, Mark Letsyuk, the company’s head of analysis and research, told crypto news Forklog .
Often, exchanges do not block wallets involved in the financing of the Russian military aggression for more than six months, despite requests from law enforcement authorities, the Ukrainian blockchain forensics experts pointed out.
“Centralized exchanges should block such wallets as soon as possible after notification. But most often they are either not blocked at all, or they are blocked very late, when dirty funds have already passed through them and the account is empty,” Letsyuk added to and commented on the findings.
He also noted that Whitebit is the fastest to respond to alerts from law enforcement agencies and cybersecurity companies while working with Hapi Labs and Ukrainian special services to track and block transactions related to the Russian campaign.
Binance representatives referred to a recent article by Chagri Poyraz, head of its global sanctions team, which highlights that the platform uses analytical tools from Elliptic, Chainalysis and TRM Labs to monitor transactions. He also explains that it is not very easy to block incoming transactions that can only be investigated after they have been carried out.
These funds can be traced, but it is very difficult to freeze or block them, he elaborated. Poyraz also emphasized that unregulated or sanctioned exchanges do not perform know-your-customer (KYC) checks or comply with existing AML rules. And most of them are based in Russia, while some operate from China or India.
Binance also recalled that during the first eight months of the conflict in Ukraine, more than $4 million in cryptocurrency was raised in support of pro-Russian organizations, most of which are already under sanctions. According to a report by Elliptic released in February 2023, such entities have raised about $4.8 million for the Russian military and affiliated militias.
The two quoted figures are much smaller than the one produced by Hapi Labs, which may indicate that not all of the funds passing through the wallets the company studied represent war-related donations. Both sides in the conflict have collected crypto and, according to Elliptic, over $212 million has been sent to Ukraine.
Do you think crypto exchanges have the means to restrict transactions related to financing the war in Ukraine? Share your thoughts on the topic in the comments section below.
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