In a blog post published October 1, 2018, cryptocurrency exchange service ShapeShift refuted a recent Wall Street Journal report claiming that approximately $9 million illegally obtained funds went through the exchange. ShapeShift’s CEO Erik Voorhees has issued a cutting rebuke of WSJ’s claims. The CEO emphasized that the authors’ claims were factually incorrect.
Money Laundering Claims
Voorhees further wrote that the exchange had been working with the WSJ for almost six months, but the final story “omitted relevant information.” He also claimed that “the authors do not have a sufficient understanding of blockchain and our platform in particular.”
He continued, stating that “even if it was true” that $9 million was laundered through ShapeShift, it would represent only 0.15 percent of the exchange’s total trading volume. Moreover, the exchange has “a strong record of complying with law enforcement requests, and has provided assistance in over 30 investigations involving 13 different countries.”
— Erik Voorhees (@ErikVoorhees) October 2, 2018
The controversy first unfolded when the Wall Street Journal published an article titled “How Dirty Money Disappears Into the Black Hole of Cryptocurrency” on September 28, 2018. Authored by Justin Scheck and Shane Shifflett, it put forward the narrative that the service could be used launder money. A portion of the article reads:
“A North Korean agent, a stolen-credit-card peddler and the mastermind of an $80 million Ponzi scheme had a common problem. They needed to launder their dirty money. They found a common solution in ShapeShift AG, an online exchange backed by established American venture-capital firms that lets people anonymously trade bitcoin, which police can track, for other digital currencies that can’t be followed.”
It went on to talk about privacy coins like Monero (XMR) which are untraceable and make them ideal for money launderers. The article also blamed ShapeShift and its policies, saying that no changes were made to their identification policy.
ShapeShift claimed that there were some fundamental misunderstandings of how wallet addresses work, which may have resulted in some of the WSJ’s wrong conclusions. One such example was that funds from a suspicious transaction were sent to an exchange, which later sent funds to ShapeShift. Voorhees wrote:
“Because ShapeShift happens to be a customer of this same exchange – 10 months later in a completely unrelated transaction – the exchange sent funds to ShapeShift. The authors didn’t understand how to properly read the blockchain transactions, so they assumed there was $70k in ‘dirty money’ sent to ShapeShift.”
Voorhees said ShapeShift has asked WSJ for additional transaction information to verify their claims, but the news organization had not complied by the time of publishing the post.
Voorhees asserted that ShapeShift is one of the most transparent exchanges operating today. The exchange ensures that every transaction through them is published online, in spite of the user privacy policies maintained to date. The CEO claims that the initial report relied solely on this information to conduct its investigation, adding that “perhaps the irony is lost on the WSJ, but the WSJ would have been unable to do this kind of investigation with any other crypto exchange, because they aren’t transparent in this way.”