WSJ’s ShapeShift money-laundering claims greatly overstated, says CipherBlade

Carol Gaszcz
Bobby Cho, the man who helmed DRW's crypto trading operation, announced Wednesday that he is stepping away from the company.Launched in 2014, Cumberland was one of the first instances of mainstream financial services entering the digital currencies market.The post Bobby Cho, head of DRW's crypto business, is set to depart the firm appeared first on The Block.

Investigation agency CipherBlade carried out a forensic research into money laundering accusations WSJ made against ShapeShift AG. In September last year, WSJ published an article claiming Shapeshift enabled laundering of almost $9 million funds. According to WSJ, traceable cryptocurrencies were exchanged into non-traceable tokens, such as monero. CipherBlade’s research shows the accusations were greatly overstated as it claims a less than 2.3 million can be attributed to possible money laundering.

“In short, the WSJ used flawed methodology which generated highly inflated claims that were used to single out one exchange for transactions that are neither unusual nor illicit,” CipherBlade writes.

CipherBlade describes WSJ’s methodology as “fundamentally flawed” which lead to overstating the laundering claim “by a factor of 4x.” In fact, just 1 per cent of all ETH traded came from suspicious wallets. Moreover, only a small amount of funds—0.33 per cent of the ETH that had come from suspicious wallets—was exchanged to monero, even though WSJ claimed dirty assets were exchanged to this cryptocurrency to make them untraceable. 

According to CipherBlade, “Of the ShapeShift addresses which receive ETH within three hops from the initial dirty addresses, less than half of the ETH traded through them are tainted. Less than one third of that tainted ETH is traded for Monero.”

As far as CipherBlade research shows, the total value of tainted ETH that has been traded through ShapeShift was $2,117,804.70; adding another 40.11 BTC that have been tainted does not come close to the 9 million WSJ traced.