EU Watchdogs Scrutinizing OKX Over $100M in Bybit Laundered Funds: Report

Crypto exchange OKX has denied ongoing investigations by the European Union on its social media channels. However, reports from Bloomberg indicate that EU regulators are scrutinizing a service offered by OKX that may have played a role in laundering $100 million in funds from the Bybit hack.

According to a March 11 Bloomberg report, national watchdogs from the EU's member states discussed the issue during a meeting hosted by the European Securities and Markets Authority's Digital Finance Standing Committee on March 6. The topic of discussion centered around OKX's decentralized finance platform and wallet service, which may have facilitated the laundering of Bybit funds.

Bybit CEO Ben Zhou revealed that nearly $100 million, or 40,233 Ether (ETH), from the $1.5 billion hack had been laundered through OKX's Web3 proxy. A portion of these funds are now untraceable. OKX's wallet service boasts 53 million addresses and can connect to 100 blockchains.

The question for EU regulators is whether two OKX services fall under the Markets in Crypto-Assets (MiCA) framework and, if so, whether the exchange could be penalized. Fully decentralized platforms may be exempt from MiCA regulation, but regulators from Austria and Croatia argue that OKX's Web3 service should be subject to EU rules.

OKX has responded to the allegations by posting a statement on X, refuting claims of ongoing investigations by the EU. The company asserts that "Bybit's statements are spreading misinformation" and defends its Web3 wallet services. Haider Rafique, OKX Global's chief marketing officer, also provided his take on the matter: "We spoke to Bloomberg today and provided our statement refuting some of the alleged claims. It is preposterous to suggest that WE as a company would be involved in laundering stolen funds."

The theft of $1.5 billion in ETH and ETH-related tokens from Bybit is the largest crypto hack to date. Crypto investigators have linked the attack to the Lazarus Group, a North Korean hacking ring. According to Zhou, 3% of the stolen funds have been frozen, while 20% have gone dark.

The European Union's scrutiny of OKX raises concerns about the regulation of decentralized finance platforms and wallet services within the EU. As regulators weigh in on whether these services should fall under MiCA rules, crypto enthusiasts and investors remain closely watching the developments.