A new report from the Wall Street Journal found that $88.6 million in illicit funds have been funneled through 46 documented cryptocurrency exchanges. $9 million of these funds is reported to have gone through Switzerland-based digital currency exchange ShapeShift.
Startup creator Erik Voorhees founded the completely anonymous Bitcoin trading exchange ShapeShift in 2014. While police are capable of documenting activity on the exchange, all identities of traders are completely hidden. The WSJ reports that it developed a computer program capable of tracking funds from over 2,500 suspected investment frauds, blackmail schemes, and other alleged crimes using leading cryptocurrencies BTC and Ethereum to conduct the investigation. The data collected on ShapeShift came from downloading stored lists of the latest 50 transactions posted every 15 seconds to the exchange’s website.
WSJ reports that criminals have been using ShapeShift’s anonymity protection to convert BTC into untraceable cryptocurrency Monero. Voorhees told the Wall Street Journal in an interview that he does not think that “people should have their identity recorded to catch an occasional criminal.” However, the article seems to suggest that ShapeShift has continued to process millions of fraudulently obtained dollars under the false claim that their motivations are to protect user identity.
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The WSJ proceeded to provide ShapeShift with a list of suspicious addresses linked to the exchange, which were subsequently banned from the platform. Chief legal officer at ShapeShift Veronica McGregor told the WSJ that the company is planning to require user identification data beginning on October 1st.
Contrasting the opinions of Voorhees, McGregor stated, ““just because it’s the personal philosophy of the CEO doesn’t mean that’s how the business is going to be run. He’s not pro-money-laundering.”
The first steps towards removing user anonymity have already begun at ShapeShift. Earlier this month the company introduced a new rewards program, which requires users to submit “basic” personal information for eligibility. The new membership model will soon become mandatory for all users on the exchange.
In the wake of the breaking story, Voorhees has taken to Twitter accusing a lack of honesty on the part of the WSJ. “We are aware of the poorly-researched piece written against us by someone at WSJ,” writes Voorhees. “The implications are disingenuous and misleading. [The] author cherry-picked data, excluding facts contrary to the vilification narrative. $9m figure is less than 0.2% of our volume over the time-period. Meanwhile global money laundering through banks is 2-5%. Op-ed forthcoming.”
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