Cryptocurrency Trading Platform Faces Money Laundering Crisis: $28 Billion Flow Under Investigation

Industry Vanity and Reality Contradiction

As the cryptocurrency industry gradually moves into the mainstream spotlight and gains recognition from Wall Street and traditional finance, a covert money laundering storm is silently unfolding.

According to joint investigations by the International Consortium of Investigative Journalists and several well-known news organizations, illegal funds flowing into major global cryptocurrency exchanges over the past two years have reached at least $28 billion. These black funds originate from hackers, scam groups, extortionists, and various criminals, including overseas cybercrime gangs and scam networks operating across multiple countries and regions.

Researchers from cryptocurrency investigation firms point out that law enforcement agencies are overwhelmed in responding to the increasing illegal activities in this field, and this situation has become a hidden threat to global financial security.

Three Major Crime Fund Flows

The investigation reveals three main pathways through which black money enters exchanges.

Stolen Funds from Hackers

In February this year, a major theft shook the cryptocurrency world. A well-known exchange was hacked, with stolen funds amounting to $1.5 billion, setting a record in cryptocurrency history. Within just a few days, the hackers transferred the stolen Ethereum to exchange platforms and converted it into Bitcoin.

Blockchain tracking data shows that during the same period, multiple deposit accounts on a mainstream exchange suddenly received $900 million worth of Ethereum from the exchange platform used for the conversion. Tracking experts note that although this transfer technically changed ownership, the exchange became the endpoint of the hackers’ money laundering chain, helping them whitewash hundreds of millions of dollars in criminal proceeds.

Experts say that based on the timeline, the source of these incoming Ethereum is clearly suspicious—“the only reasonable explanation is that it’s stolen funds.” Even flawed risk control systems should have detected such issues. However, the exchanges have not responded positively to this.

Systematic Operations of Scam Groups

Scamming has become a stubborn problem in the crypto industry, with “pig butchering” scams being particularly rampant. Scammers pose as admirers to build trust with victims and then induce them to invest in fake cryptocurrency projects.

FBI data shows that last year, crypto investment scams caused losses of up to $5.8 billion. In one case in Minnesota, a father was scammed out of $1.5 million, with over $500,000 eventually flowing into a trading platform. The case also revealed a shocking fact—that many accounts opened through KYC submissions on exchanges were actually operated by scammers using stolen identities as “money mules.”

A 58-year-old victim in Alberta, Canada, lost her life savings of $25,000 to a similar scam. Tracking shows that her stolen funds passed through multiple wallets before finally entering an exchange, but it took up to six months from theft to account freeze.

Structured Money Laundering by Crime Groups

An international criminal organization has established a vast black industry chain in Southeast Asia. Besides running legitimate financial businesses, they secretly operate illegal digital trading platforms, dubbed the “Amazon of criminals”—where stolen personal information, scam support, and money laundering services are traded.

The international finance authorities have issued bans prohibiting this organization from accessing the U.S. financial system, labeling it as a “core hub” for cyber theft and investment scams. However, investigations found that within two and a half months of the ban, the organization still transferred over $100 million into trading platforms via cryptocurrency wallets.

The “Compliance” Dilemma of Exchanges

Mainstream trading platforms generally claim that security and compliance are core to their operations. A major exchange stated it has responded to over 240,000 law enforcement requests, with 65,000 in the past year alone. Another platform said it has invested heavily in trading monitoring and fraud detection tools.

However, data tells a different story. Despite some exchanges reaching settlements with regulators over violations and promising reforms, large suspicious fund inflows have never truly stopped.

A cryptocurrency expert from the University of California pointed out the fundamental contradiction: “If they remove criminals from the platform, exchanges will lose a significant source of revenue. So, they actually have an incentive to tolerate illegal activities.”

This directly highlights a pain point in the industry—the ability of exchanges to identify suspicious transactions is limited under current regulatory frameworks, and proactive in-depth reviews can reduce operational efficiency and profits.

Gray Channels for Cryptocurrency Realization

The investigation also uncovered a key link in the global money laundering network: cryptocurrency cash-out stores scattered across Asia and Eastern Europe.

These stores are often hidden inside ordinary commercial venues, where customers can exchange large amounts of cryptocurrency for fiat currencies like USD or EUR without showing ID. Data from tracking companies shows that last year, similar stores in Hong Kong processed transactions exceeding $2.5 billion.

A field investigation in Kyiv, Ukraine, revealed that after a reporter transferred $1,200 worth of cryptocurrency, they received cash bundled with rubber bands within minutes, without receipts, and related records were immediately deleted after the transaction.

Even more concerning, these stores’ cryptocurrency funds often originate from mainstream trading platforms. Transaction records show many stores have received transfers from large exchanges. This forms a complete realization chain: criminal funds enter exchanges → cash out to cash-out stores → exchanged for cash.

Weak Links in Industry Regulation

The main difficulty in this investigation is that many criminal accounts have not yet been publicly exposed; current investigations only reveal the tip of the iceberg. However, this is the first systematic tracking of funds on specific platforms.

International financial and law enforcement agencies are also adjusting strategies. In April, the U.S. Department of Justice shifted its focus on prosecuting cryptocurrency crimes, claiming that efforts should target terrorists and drug traffickers using cryptocurrencies, rather than holding platforms responsible. This decision effectively weakens law enforcement oversight of exchanges.

Legal experts believe whether exchanges are illegal depends on specific circumstances. Even if they handle black money, if they fail to establish robust internal anti-money laundering mechanisms, they could still be prosecuted for violating the Bank Secrecy Act. But in reality, effective regulatory frameworks and enforcement resources are often insufficient to keep pace with the industry’s rapid development.

Cryptocurrency is becoming an increasingly important part of the global financial system. The $28 billion in black money flow issues reflect the deep-rooted challenges in industry regulation—how to balance fostering innovation and preventing crime.