Treasury Sanctions Crypto Exchange for Facilitating Ransomware
(Bloomberg) -- As part of a sweeping crackdown on ransomware on Monday, the Biden administration sanctioned a virtual cryptocurrency exchange called Chatex, accusing it of facilitating financial transactions for hackers.
An analysis of Chatex’s known transactions indicates that more than half are “directly traced to illicit or high-risk activities such as darknet markets, high-risk exchanges and ransomware,” according to the U.S. Treasury Department statement.
Chatex didn’t return a message via its website for comment. The Treasury Department said it claims to have a presence in multiple countries.
Chatex allegedly has direct ties to another cryptocurrency company, Suex OTC, that was cited by the Biden administration in September for facilitating ransomware payments. Chatex used “Suex’s function as a nested exchange to conduct transactions,” according to the Treasury Department.
In addition, the largest shareholder of Suex, Egor Petukhovsky, also has interests in Chatex.com, according to blockchain researcher TRM Labs. Petukhovsky is a managing partner of Chatex, according to his LinkedIn profile. He didn’t immediately reply to a request for comment.
“Suex and Chatex, while nominally distinct businesses, share extensive corporate and legal relationships,” TRM recently said in a blog post.
A representative for Suex couldn’t be located for comment.
“Today’s action against Chatex is really a continuation of the Suex action,” said Ari Redbord, head of legal and government affairs at TRM Labs and a former federal prosecutor and treasury official. “Chatex was an alter ego of Suex and part of the illicit underbelly that Treasury and DOJ are laser focused on.”
Redbord said he expects to see continuing efforts by the government to go after cryptocurrency-related entities that facilitate ransomware and other illegal activity, and he said the actions against Chatex showed the government “using a scalpel to take out a bad actor” rather than cracking down on the broader, legitimate cryptocurrency market.
On its website, Chatex.com, the company says its main task is to “provide access to a simple, reliable, fast and secure storage, transferring, selling and exchanging cryptocurrencies.” “Crypto is complicated,” according to the website. “Chatex is not.”
Chatex claims to have more than 350,000 registered users and to have focused on emerging markets like Eastern European and Commonwealth of Independent State countries with upcoming expansion to India and Africa, according to the website. The exchange said it lets retail users trade and store some 14 different cryptocurrencies, and is building products that would let unbanked merchants accept payments in crypto. Chatex calls itself “cryptobank for Telegram,” referring to the instant messaging app.
Chatex is seeking to raise funds at valuation of $12.5 million by issuing tokens, called CHTX, according to Chatex’s website, which says the token sale was supposed to take place in September. Tracker CoinMarketCap is showing the token sale as ongoing. The company trying to raise money through the token sale is the same company as the as the Chatex that was just sanctioned, according to blockchain research firms Chainalysis Inc. and Elliptic Enterprises Ltd.
One of the digital addresses associated with Chatex holds a number of NFTs, worth around $58,000, according to Tom Robinson, Elliptic’s co-founder and chief scientist, who said it’s the first time he’s seen a sanctioned entity holding NFTs.
Chatex’s addresses first became active in September 2018, according to a blog post published Monday by Chainalysis. Since then, the service has received at least $77.5 million worth of Bitcoin, with more than $17 million coming from illicit sources, including darknet markets, scams and various ransomware strains, according to the blog.
In addition, the Treasury Department issued sanctions against Izibits OU, Chatextech SIA and Hightrade Finance Ltd. for providing support and assistance to Chatex. “These three companies set up infrastructure for Chatex, enabling Chatex’s operations,” according to the Treasury Department.
Latvian government officials suspected the operations of Chatextech, while Estonian authorities revoked the license of Izibits, according to the Treasury Department. Representatives for Izibits, Chatextech and Hightrade Finance couldn’t immediately be located for comment.
“The State Revenue Service of the Republic of Latvia has carried out an inspection of Chatextech and identified significant irregularities,” according to a statement from the government. The company was fined and its officials were included in a register of high-risk persons, meaning they will be prevented from doing business in Latvia, according to the statement.
“We will not allow activities that legalize criminal assets, including through the use of malware and virtual currencies,” Finance Minister Janis Reirs said in a statement.
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