Cross-chain swap protocol Thorchain has become a go-to money laundering tool for hackers, with more than 50% of recent transaction volume involving stolen funds according to an analyst.
In a viral Twitter thread, analyst Tay revealed that over $57 million worth of Ethereum tied to various exploits has been bridged through Thorchain’s THORswap service to Bitcoin in just the last four months.
This represents over 65% of all ETH-to-BTC volumes on Thorchain during that period, indicating most activity stems from laundering illicit proceeds rather than regular trading.
Millions in Hacked Funds Bridged to BTC
According to Tay’s findings, around $32 million worth of ETH originating from the FTX hacker was swapped to BTC via Thorchain.
Another $15 million in ETH and USDT stolen from crypto trading platform Stake.com was also traced being bridged to Bitcoin through Thorchain.
In addition, $10.4 million of Ethereum tied to compromised seed phrase wallets and hacks of services like Nirvana and Automic Wallet have flowed through Thorchain to BTC wallets.
Thorchain’s Decentralized Nature Enables Abuse
Thorchain aims to enable seamless swaps between different cryptocurrency networks using decentralized liquidity pools instead of order books.
However, the platform’s decentralized and anonymous nature also makes it prone to abuse by criminals and hackers seeking to convert stolen coins to other assets. KYC requirements are limited on Thorchain itself.
While protocols like Thorchain highlight the benefits of decentralization, cases like this also underscore the need to balance open access with controls limiting illicit fund flows – an issue under debate across DeFi.
For Thorchain specifically, the dominant volume of laundered assets spotted by Tay may motivate governance moves by node operators to impede suspected criminal proceeds being swapped.
Thorchain developers are also exploring integrations with on-chain monitoring tools like Chainalysis to potentially flag high-risk transactions. But solutions preserving user privacy remain vital.
With hackers constantly targeting vulnerabilities in crypto systems, the cat-and-mouse game to limit their exploitation for money laundering continues. For now, the data shows thieves find Thorchain’s decentralized and anonymous nature very convenient.