Cryptocurrency Scam Black Industry Chain Exposed: $28 Billion in Illegal Funds Flowing to Trading Platforms

Over the past two years, global cryptocurrency exchanges have become “ATM machines” for criminals. A major investigation conducted by The New York Times in collaboration with the International Consortium of Investigative Journalists shows that at least $28 billion in illegal funds from hackers, scam groups, and extortionists have continuously flowed into leading global trading platforms.

The sources of these huge sums are diverse—ranging from money laundering activities by North Korean cybercriminal groups to scams spreading from Minnesota, USA, to Southeast Asia. Even more concerning is that, despite the cryptocurrency industry gradually mainstreaming, regulatory authorities are weakening their efforts to combat such crimes.

The Shocking Scale of Cryptocurrency Scams

The investigation data is startling. According to Chainalysis statistics, in 2024, at least $4 billion in scam-related funds were received by global cryptocurrency exchanges. The joint investigation team interviewed 24 victims of cryptocurrency scams, all of whom had their stolen funds ultimately flow into industry-leading platforms.

A typical victim is a father from Minnesota, USA. Following advice from a Seattle-based family financial company, he invested in cryptocurrencies but was scammed out of $1.5 million. Over $500,000 of that eventually flowed into a major exchange.

Cryptocurrency scams have become a global issue. FBI data shows that last year, cryptocurrency investment scams caused victims losses of up to $5.8 billion. Among the most common methods is “pig butchering” scams (where scammers first establish trust with victims and then induce them to invest in fake projects). Many elderly investors, corporate executives, and even bank presidents have fallen victim.

Exchanges as the Final Stop for Money Laundering

Cryptocurrency exchanges play a crucial role in the entire scam industry chain—they are convenient channels for criminals to convert illegal funds into real currency.

Investigations found that a large Cambodian financial group (listed as a criminal entity by the U.S. Department of the Treasury) maintained continuous financial dealings with multiple top-tier exchanges. From July 2024 to July 2025, the group transferred over $400 million to a leading industry platform. Even after the U.S. Treasury issued a ban on May 1, 2025, fund transfers continued—within two and a half months after the ban, the group transferred at least $77 million to the platform.

Even more alarming is North Korean hackers’ money laundering activities. In February, a cryptocurrency tracking firm discovered that after North Korean hackers stole $1.5 billion, they quickly exchanged Ethereum for Bitcoin, then transferred $900 million into five deposit accounts at a top exchange. ChainArgos CEO noted that the exchange effectively became the endpoint of the hackers’ money laundering chain, helping to whitewash hundreds of millions of dollars in illicit gains.

Fake Accounts Dominate, KYC as a Paper Tiger

Surprisingly, while the exchange’s real-name verification (KYC) mechanisms seem robust, they are riddled with loopholes.

In a Minnesota cryptocurrency scam case, investigations revealed two suspicious accounts. One account’s registration photo was of a woman standing in front of a ripple iron wall, with an address listed in a Chinese village. Within just a few months, this account’s transaction volume exceeded $7 million.

The second account was registered under the name of a 24-year-old woman from a rural area in Myanmar. Over nine months, this account’s transaction volume exceeded $2 million—an amount over 1,000 times the average annual salary in Myanmar, which is clearly unreasonable. A leader of a non-profit anti-fraud organization pointed out that these women are likely “fund movers,” and their personal information has been stolen by scammers.

Victims have nowhere to turn for help. Carrissa Weber, a 58-year-old woman from Alberta, Canada, was scammed out of $25,000, which flowed into a global platform. The platform claimed that the relevant accounts had been monitored since last year due to “suspicious features,” but only froze them in October this year—six months after Weber was scammed.

Cryptocurrency Exchange Points: New Global Laundering Hubs

In Kyiv, Hong Kong, Dubai, and other locations, a covert type of offline cryptocurrency exchange shops has quietly emerged. Entering these shops, one can often exchange large amounts of cryptocurrency for US dollars, euros, and other fiat currencies without showing ID, completing cash transactions.

Crystal Intelligence data shows that last year, Hong Kong’s cryptocurrency exchange shops handled over $2.5 billion in transactions. Data from cryptocurrency analysis firms indicates that leading industry platforms received $531 million from such currency exchange shops last year.

A reporter conducted on-site investigations in Ukraine. After transferring $1,200 in cryptocurrency via Telegram, he received a bundle of cash tightly bound with a rubber band within minutes, with no receipts or chat records retained. These shops have become perfect venues for criminals to convert digital assets into cash.

In a high-end office building in Dubai, the reporter saw a customer exchanging $6,000 worth of cryptocurrency for a stack of local banknotes. The exchange’s cryptocurrency address showed that within two weeks in September, it received over $2 million in funds.

Regulatory Efforts Are Actually Weakening

Ironically, as the cryptocurrency industry grows exponentially, with daily legitimate transaction volumes reaching billions of dollars, law enforcement efforts are waning.

In April this year, the U.S. Department of Justice disbanded a specialized cryptocurrency crime enforcement team, claiming that prosecutors should focus on combating terrorists and drug traffickers, and no longer hold platforms used by these criminal organizations accountable.

This shift leaves law enforcement powerless against the proliferation of illegal activities. A head of a cryptocurrency investigation firm stated, “Law enforcement agencies are completely unable to cope with the current state of illegal activities in this field, and this situation cannot continue.”

Double Standards in Exchange Compliance

Confusingly, some platforms, despite having previously settled with authorities over violations of financial regulations, continue to accept large amounts of suspicious funds after settlement.

A leading industry platform was fined $4.3 billion for transactions involving terrorist organizations, and claimed to be “strictly against illegal activities.” However, investigations show that after settling with authorities, it continued to receive suspicious funds from multiple sources.

Another global platform reached a $504 million settlement with U.S. authorities in February for violating money transfer laws, yet within five months after the agreement, it received over $220 million in suspicious funds. Its chief legal officer claimed to have established comprehensive compliance mechanisms, but actual effectiveness is questionable.

A cryptocurrency expert from the University of Texas pointed out the root problem: “If criminals are expelled from the platform, exchanges will lose a significant source of revenue. Therefore, they have an incentive to tolerate these illegal activities.”

Conclusion

This investigation only reveals the tip of the iceberg of the cryptocurrency scam black industry chain. Since many criminal accounts have not been publicly exposed, the actual scale may far exceed $28 billion.

As cryptocurrencies gradually enter the mainstream and the industry continues to expand, a troubling question looms: how to protect legitimate investors while plugging the loopholes criminals exploit to launder money through trading platforms? This not only tests the self-discipline and compliance commitment of exchanges but also the enforcement strength of regulatory authorities.