QuadrigaCX transactions tied to dark web, says research
New research cites that numerous transactions from QuadrigaCX cold wallets were traced back to dark market websites. The research argued that the controversial exchange acted as a front company to convert illicit cryptocurrencies into clean cryptocurrencies.
The research analyzed five of the exchange’s cold wallets. “These cold wallets are associated with a significant amount of criminal activity. This criminal activity includes but is not limited to; dark markets, child pornography, fraud, identity theft, hacking, blackhat services, drug trafficking, and human trafficking,” reads the research. The research added that there were no middlemen between the operator of the cold wallets and the sender/recipient of the funds associated with these transactions. There hardly any legal transactions in some of the cold wallets.
The research found that QuadrigaCX obtained funds from several illegal sources. The exchange not knowing of these illegal transactions is “implausible”. The exchange was either manually initiating these deposits or they gave their cold wallet addresses to customers who deposited cryptocurrencies to the wallets. Like any other money laundering practice, these funds were mixed with other transactions to prevent people from tracking their origin.
Customer funds for criminal activities
“QuadrigaCX received tens of millions of dollars that could not have derived from customer deposits. Given the general public’s (and law enforcement/financial institutions) unfamiliarity with blockchain, the obfuscation of their wallet addresses, and poor tracking of customer deposits/withdrawals on the exchange, QuadrigaCX was in a position where they could easily clean most of their illicit funds stemmed from customers,” alleged the research.
The research suggests that customer funds were siphoned off to some of the illicit cold wallets. Some transactions that were tracked from these cold wallets were sent to Bitfinex, one of the largest crypto exchanges. “Some of the funds that were sent to Bitfinex were of questionable legal nature,” reads the research. Bitfinex is currently under probe by the U.S. DoJ [Department of Justice] and is facing numerous other allegations including Bitcoin manipulation.
To top it all off the exchange claims to have kept no books to track customer funds. This is quite convenient for the exchange as the records of this can only be obtained from blockchain and the customers themselves. As most of the transactions are obfuscated it would be a herculean task to chart out all of the customer funds on the blockchain.
QuadrigaCX received “tens of millions of dollars” from its business. Customer funds alone cannot be the source of such a hefty amount. The research cites that the exchange sent and liquidated down $400 million in each of its associated address and its wallet address. “The estimated liquidated total far exceeds what QuadrigaCX should have been able to glean from simply absconding all of their customer funds,” claims the research.
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