Ukrainian police shut down allegedly illegal crypto exchanges

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Blockchain & Cryptocurrency, Cryptocurrency Fraud, Cybercrime

Authorities claim exchanges would facilitate money laundering Prajeet Nair (@prajeetspeaks) • Aug 14, 2021 US dollars and other currencies seized by Ukrainian police this week from an alleged illegal cryptocurrency exchange ( Source: Security Service of Ukraine)

Ukrainian police this week shut down a slew of allegedly illegal cryptocurrency exchanges across the country that processed around $ 1.1 million in virtual currency transactions each month.

See also: An Assume-Breach Mindset: 4 Steps to Protecting What Attackers Are Looking For

This network of cryptocurrency exchanges reportedly started operating earlier this year and around 1,000 customers used their services each month. Of the $ 1.1 million in virtual currencies that the exchanges processed each month, traders took a commission of 5% to 10% on each transaction, according to the Security Service of Ukraine, which is the main body of law enforcement of the land.

The exchanges are believed to help facilitate money laundering services for various people. Security officials say clients of these exchanges have received funds from digital wallets from other exchanges, such as Yandex.Money, Qiwi and Webmoney, which are based in Russia and are banned in Ukraine.

“Clandestine cryptocurrency exchanges were requested because they offered anonymity of transactions and the possibility of money laundering,” according to Ukrainian authorities.

The security service has not announced any arrests associated with the trade closure, but officials note the investigation is ongoing. A police spokesperson could not be reached immediately for further comment.

The problem with crypto

In addition to closing these exchanges, Ukrainian authorities seized equipment and materials from some of them, including:

Computers and servers that would have contained data on some of the exchanges; Mobile devices with installed VPN software; Seals and constituting documents of shell companies registered in Ukraine and allegedly used for money laundering activities; Approximately $ 37,000 in cash, US dollars and other foreign currency.

Earlier this year, Ukrainian security services targeted three other cryptocurrency exchanges in the Kiev region, which were also allegedly involved in money laundering schemes, officials said.

Mobile phones and other documents seized by Ukrainian police (Source: Security Service of Ukraine)

Roger Grimes, a data-based defense evangelist at security firm KnowBe4, notes that many of these exchanges appear to actively advertise their alleged abilities to launder virtual currencies.

“It appears the community is promoting its use in illegal activities, much like bitcoin was boosted by early dark web trading sites like Silk Road,” Grimes said. “Cryptocurrency users think they are hiding their transactions from the government to avoid paying excessive fees, privacy or legal reasons. They will learn that the government will get their money in some way. other, even if it means destroying those cryptocurrencies. “

The problem with cryptocurrency exchanges extends beyond money laundering. Earlier this week, a hacker breached the blockchain-based Poly Network platform to steal more than $ 600 million in cryptocurrency, although on Friday it appears the attacker returned around $ 340 million of virtual currency that was taken (see: Poly Network Says $ 600 Million in Cryptocurrency Stolen).

Grimes notes that although cryptocurrencies offer a certain level of anonymity, these virtual currencies can be traced.

“One of the ironic things about cryptocurrencies that have a blockchain back-end is that while users may be anonymous, their digital identities and transactions are locked down forever,” Grimes said. “As long as someone can associate a user with a particular identity, then they can prove exactly what transactions entered and exited your cryptocurrency wallets.”

Other inquiries

In addition to cryptocurrency exchanges that allegedly deal with money laundering, Ukrainian police have recently cracked down on other types of cybercrime. In the days leading up to a meeting between US President Joe Biden and Russian President Vladimir Putin, the country’s law enforcement arrested six suspected members of the Clop ransomware operation (see: Ukraine Arrests 6 Clop Ransomware Operation Suspects).

This law enforcement operation also involved Interpol and law enforcement agencies in South Korea and the United States, officials said.

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