Crypto Exchange eXch to Shut Down Amid Money Laundering Allegations

In a shocking move, cryptocurrency exchange eXch announced that it will cease operations on May 1, citing allegations of money laundering as the reason for its shutdown. The firm's decision comes amid reports that North Korea's Lazarus Group used eXch to launder funds stolen in a $1.4 billion exploit on Bybit.

eXch stated that the majority of its management team voted to "cease and retreat" in response to the allegations, indicating that they had chosen a "cease and retreat" strategy rather than continue operating under the threat of shutting down. The exchange claimed that it was the subject of an "active transatlantic operation" aimed at shutting it down and potentially pursuing charges.

"Even though we have been able to operate despite some failed attempts to shut down our infrastructure (attempts that have also been confirmed to be part of this operation), we don’t see any point in operating in a hostile environment where we are the target of SIGINT [Signals Intelligence] simply because some people misinterpret our goals," said eXch. This statement highlights the exchange's concerns about its safety and the potential consequences of being targeted by law enforcement agencies.

Initially, eXch denied reports from crypto sleuths suggesting that it had laundered digital assets for the Lazarus Group. However, the exchange later admitted to processing an "insignificant portion of funds" from the February hack. Individuals from eXch's management team emphasized its focus on user privacy in announcing the shutdown, claiming that some exchanges "abus[e] customers with nonsensical policies" in their attempts to fight money laundering.

The Bybit hack, one of the largest in the history of the crypto industry, resulted in more than $5 billion in withdrawals from users, including the stolen funds. CEO Ben Zhou stated on February 22 that the exchange had the means to "cover the loss" if the funds were not recovered. However, the firm later announced it would shutter some of its Web3 services and close its non-fungible token marketplace.

As of April 10, Bybit had regained its market share achieved before the hack: roughly 7%. The exchange paid more than $2 million to bounty hunters providing information that could be used to freeze some of the funds traceable to other platforms, which was estimated to be roughly 89% of the $1.4 billion as of March 20.

With eXch's shutdown, another major player in the cryptocurrency market has fallen victim to allegations of money laundering and illicit activity. The incident serves as a reminder of the ongoing challenges faced by cryptocurrency exchanges in maintaining regulatory compliance and protecting user privacy.