Millions of U.S. dollars’ worth of cryptocurrency has been sent to centralized exchanges (CEXs), most notably Binance, from wallets providing funds in support of Russia’s war effort in Ukraine, transaction data suggests. According to Ukrainian analysts, the money was transferred to the crypto trading platforms in order to be laundered.
Over 90% of Pro-Russian Crypto Transfers Identified in a Study Sent to Largest Exchange
More than $40 million was sent last year from wallets that were used to sponsor the Russian invasion of Ukraine to cryptocurrency exchanges, according to an analysis of such transactions conducted by Hapi Labs. The main purpose of these transfers was to launder the money, the Ukrainian startup claims in a post on Twitter published Tuesday.
While various amounts went to a number of crypto platforms, nearly 96% of the digital cash reached Binance, the world’s largest cryptocurrency exchange. Researchers at the company, which provides blockchain tracking tools and data analysis software, believe this is an indication of failures in the anti-money laundering (AML) procedures.
At the same time, amounts transferred in the opposite direction — from exchanges to wallets used to support the Russian war on Ukraine — are much more modest, the decentralized security protocol developers pointed out.
“Binance is still among the leaders, but as we can see, it is not the only one. Say hello to the bankrupt @FTX_Official and others!” they remarked in another tweet. Two other major centralized exchanges, Kucoin and the European, Ukraine-rooted Whitebit, are also in the top five, along with the decentralized aggregator 1inch.
Hapi Labs tracked donations for weapons and ammunition intended for the Russian army and various private military companies, including groups associated with the two Russia-backed self-proclaimed republics in the Donetsk and Luhansk regions, Mark Letsyuk, the company’s head of analytics and research, told the crypto news outlet Forklog.
Often, exchanges don’t block wallets involved in the financing of the Russian military aggression for more than six months, despite requests by law enforcement authorities, the Ukrainian blockchain forensics experts pointed out.
“Centralized exchanges should block such wallets as soon as possible after notification. But most often they are either not blocked at all, or they are blocked very late, when dirty funds have already passed through them and the account is empty,” Letsyuk added, commenting on the findings.
He also noted that Whitebit is the most quick to respond to alerts from law enforcement agencies and cybersecurity companies while cooperating with Hapi Labs and Ukrainian special services to track and block transactions linked to the Russian campaign.
Binance Blames Unregulated and Sanctioned Exchanges
Representatives of Binance referred to a recent article by Chagri Poyraz, head of its global sanctions team, who highlights that the platform uses analytical tools from Elliptic, Chainalysis, and TRM Labs to monitor transactions. He also explains that it’s not very simple to block incoming transactions which can be investigated only after they are made.
These funds can be tracked, but it is very difficult to freeze or block, he elaborated. Poyraz also emphasized that unregulated or sanctioned exchanges do not perform know-your-customer (KYC) checks or comply with existing AML rules. And most of them are based in Russia while some are operating from China or India.
Binance also reminded that during the first eight months of the conflict in Ukraine, more than $4 million in cryptocurrency was raised in support of pro-Russian organizations, most of which are already placed under sanctions. According to a report by Elliptic released in February 2023, such entities have raised around $4.8 million for the Russian military and associated militias.
The two quoted figures are much smaller than the one produced by Hapi Labs, which may indicate that not all of the funds that passed through the wallets the company studied represent war-related donations. Both sides in the conflict have been raising crypto and according to Elliptic, over $212 million has been sent to Ukraine.
Do you think crypto exchanges have the means to restrict transactions related to funding the war in Ukraine? Share your thoughts on the subject in the comments section below.
