Bankrupt Cryptocurrency Exchange AAX Withdraws 24,000 ETH from Inactive Wallets in Suspected Money Laundering Scheme
In a surprising move that has sent shockwaves through the cryptocurrency community, AAX, a cryptocurrency exchange based in Hong Kong that recently declared bankruptcy, has initiated the transfer of substantial amounts from its wallets. This action has raised suspicions of a possible attempt at money laundering, according to a statement from Cyvers, a cybersecurity firm specializing in blockchain technology.
The transactions in question involve the withdrawal of over 24,000 ETH (Ethereum), valued at approximately $70.5 million at the time of writing, from the exchange's wallets in early February. This move by AAX marks a significant development, given the exchange's previously high standing in the Hong Kong cryptocurrency market, boasting over 2 million users before its downfall.
Cyvers analysts have pointed out that the nature of these transactions indicates attempts to circumvent Anti-Money Laundering (AML) controls. "The observed activity suggests that the exchange is trying to avoid AML detection. A portion of the platform's funds was frozen by the company Tether," Cyvers reported. This statement highlights the complex strategies employed by entities attempting to launder money through the cryptocurrency ecosystem.
The owner of the addresses in question initiated the laundering process by distributing ETH across several wallets and transferring them to UmbraCash. After converting the ETH to WETH (Wrapped Ethereum), the assets were exchanged back to Ethereum and then to the stablecoin USDT (Tether). Ultimately, the unidentified individual leveraged the TRON blockchain to transfer funds through SWFT Blockchain, showcasing the sophisticated methods used to obscure the origin of the funds.
The downfall of AAX came shortly after FTX, another major cryptocurrency platform, declared bankruptcy. AAX ceased withdrawals and deleted all social media accounts following FTX's announcement, leaving its website inaccessible and its X (formerly Twitter) page untouched since November 2022. The collapse of AAX has led to significant repercussions, including the arrest of its former CEO Thor Chan and board member Haoming Lian by Hong Kong police. Despite these actions, the founder of AAX, whose identity remains undisclosed, is reportedly still at large with access to user funds and the exchange's private wallet keys.
This incident with AAX is part of a broader trend of challenges within the cryptocurrency industry, including security breaches and regulatory scrutiny. For instance, in February 2024, the decentralized cryptocurrency exchange FixedFloat lost $26 million in crypto assets due to a hack. Additionally, a report by Chainalysis noted a 30% reduction in money laundering activities within the crypto industry, indicating both the ongoing risks and the efforts to mitigate illicit financial flows.
The situation surrounding AAX underscores the volatile and uncertain nature of the cryptocurrency market, as well as the importance of robust security and regulatory compliance to protect users and maintain trust in digital asset exchanges. As the investigation continues, the cryptocurrency community remains on alert for further developments in this case and the broader implications for the industry's future.
