eXch Denies Allegations of Laundering Stolen Bybit Funds

Crypto exchange eXch has issued a statement denying allegations that it was involved in laundering funds stolen from Bybit, a popular cryptocurrency exchange. The allegations surfaced on February 22, when blockchain sleuth ZachXBT claimed that eXch laundered $35 million of the stolen funds.

Initial Accusations and Investigations

ZachXBT, a well-known blockchain investigator, reported his findings in his investigations Telegram group, stating that eXch processed a significant portion of the stolen funds. He also noted that 34 Ethereum was mistakenly sent to a hot wallet of another exchange during the process.

Nick Bax of the Security Alliance estimated that eXch processed approximately $30 million in transactions tied to North Korea on the same day. Bax warned that users of eXch should be prepared for enhanced due diligence on their source of funds from services with compliance programs.

eXch’s Response and Admission

In response to the allegations, eXch denied any involvement in laundering the stolen funds. However, the exchange admitted to processing a small portion of the stolen assets, which it described as an “isolated incident.” According to eXch, the address in question received the stolen funds, but no other Ethereum blockchain addresses, aside from deposit addresses, were linked to its platform.

eXch also stated that the fees generated from these transactions would be donated for public benefit. The exchange’s statement was made on the Bitcointalk forum on February 23.

Bybit’s Efforts to Retrieve Stolen Funds

Bybit has been actively working with blockchain forensic experts to trace the stolen funds. The exchange has also offered a 10% bounty for assisting in the retrieval process.

Lazarus Group’s Involvement and Laundering Patterns

The Bybit theft has been attributed to North Korea’s Lazarus Group, which has a history of laundering stolen crypto assets. According to Elliptic, a blockchain analytics and compliance firm, the Lazarus Group follows a characteristic pattern when laundering stolen funds.

This pattern includes swapping stolen tokens for native blockchain assets like ETH to prevent token issuers from freezing the funds. The group then obscures the transaction history by dispersing funds across multiple wallets, moving assets between blockchains, and using mixing services like Tornado Cash.

In the case of the Bybit hack, stolen tokens were almost immediately exchanged for ETH through decentralized exchanges. The stolen ETH is now being converted into BTC, a step that precedes further obfuscation through mixers.

However, the large volume of assets may complicate this process, according to Elliptic.

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