Wall Street Claim That ShapeShift Laundered $9 Million

In the fall of last year, the Wall Street Journal (WSJ) published an article that didn’t do much to help the reputation of cryptocurrency exchange ShapeShift.  The media outlet, which has a history of not always doing its due diligence, accused ShapeShift of having facilitated money-laundering activity of Bitcoin Core (BTC), Ether (ETH) and other currencies of as much as $9 million.  However, the report was based on flawed data and a blockchain intelligence firm has acknowledged that the WSJ was wrong.

CipherBlade was asked by ShapeShift to investigate the claims.  It published its findings yesterday, asserting that the WSJ claim was “overstated by a factor of 4x.”  It added, “By tracing alleged ‘laundering’ through ‘no more than two intermediaries before reaching an exchange’, the WSJ’s stated methodology was fundamentally flawed […] The tracing of any funds — illicit or not — over the course of multiple transactions is extremely difficult, and presenting the total contents of subsequent wallets as illicit is forensically unsound.”

It adds that WSJ’s findings were egregiously distorted, explaining, “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. Using the most generous assumptions, this is still only 23.53 percent of the WSJ’s claimed $9 million.”

CipherBlade critiqued the way WSJ conducted its analysis, as well as the data itself.  It asserts that the data does not support the conclusions and the analysis firm adds, “Of the 5523 ShapeShift addresses in the WSJ’s spreadsheet that actually correspond to trades, 30.38% of the BTC and a mere 5.53% of the ETH that was sent to those addresses were exchanged for Monero.”

Erik Voorhees, the founder and CEO of ShapeShift, immediately refuted the claims after the WSJ report broke.  He said at the time that it was “factually inaccurate and deceptive,” adding that its authors did not have proper knowledge of cryptocurrency technology.  Based on the CipherBlade analysis, and other misleading reports published by the WSJ, his assertion hits the target.