eXch Denies Money Laundering of Stolen Bybit Funds
Crypto exchange eXch has denied claims of money laundering of stolen Bybit funds amounting to $35 million. The claims first surfaced on Feb. 22 when blockchain researcher ZachXBT said in his Telegram channel that eXch had facilitated illicit transactions. He further stated that 34 ETH was transferred by mistake to a different exchange’s hot wallet during the process.
Blockchain Experts Monitor Suspicious Transactions
Security Alliance’s Nick Bax supported ZachXBT’s report, estimating that eXch processed nearly $30 million linked to North Korea on the same day. Security firm SlowMist also reported that the majority of the stolen Ether had already been converted into Bitcoin, Monero, and other cryptocurrencies through eXch’s platform.
eXch Defends Against the Allegations
In a Feb. 23 announcement on Bitcointalk, eXch refuted the accusations but admitted to having handled a tiny fraction of the stolen funds, terming it an “isolated incident.” eXch explains that the address 1123 received such money, but none other than Ethereum deposit addresses were used in its system. The exchange also stated it intended to give transaction fees from the money for the public good.
Bybit’s Efforts to Recover the Stolen Funds
Bybit is trying its best in collaboration with blockchain forensic specialists to track down the loot and has also offered a 10% incentive to assist in the recovery process. The loot has been attributed to the North Korea-backed Lazarus Group, which between the years 2020 and 2023 laundered over $200 million worth of crypto assets.
Lazarus Group’s Money Laundering Tactics
The Lazarus Group, according to blockchain analytics firm Elliptic, adopts a distinctive method of washing stolen funds. They first move stolen tokens into native chain assets like ETH to prevent issuers from freezing them. Stolen tokens in the Bybit hack were quickly exchanged for ETH via decentralized exchanges.
The attackers proceed to make the trail untraceable by distributing the funds across multiple wallets, transferring assets across blockchains, and using mixers like Tornado Cash. Within two hours of the attack, the stolen funds had been distributed across 50 wallets with approximately 10,000 ETH each. As of Feb. 23, almost 10% of the stolen assets amounting to $140 million had already been laundered.
Elliptic determined the hacked ETH is being converted to BTC, one of the next steps towards further anonymization using mixing services. The elevated asset value, however, will likely be challenging to cover completely.
Current Investigation and Industry Response
While the blockchain detectives still monitor the stolen funds, eXch’s role remains in question. The exchange maintains its innocence claim as it accepts unintentional dealing with criminal funds. The cryptocurrency community keenly follows as Bybit and security firms fight to get the stolen funds back and prevent the breach from recurring.
