WSJ's ShapeShift Exposé Overstated Money Laundering by $6 Million, Analysis Says

A Wall Street Journal investigation from last September, titled "How Dirty Money Disappears Into the Black Hole of Cryptocurrency," claimed the crypto conversion platform ShapeShift had facilitated at least $9 million worth of money laundering over several years with "a parade of suspected criminals."

Now, at ShapeShift's request, the blockchain analytics firm CipherBlade recreated the 2018 report and found less than $3 million in transactions involving potentially "Tainted" funds.

"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," the CipherBlade report says.

Add to that ether to roughly 40 bitcoin, which ShapeShift itself found to be associated with suspicious wallet's the WSJ identified, and the total estimate falls just shy of $3 million.

According to a tweet by CEO Erik Voorhees, ShapeShift processed crypto worth $30.3 million a month in 2017 alone.

Still, experts such as Pawel Kuskowski, CEO of the analytics firm Coinfirm, told CoinDesk there's no clear answer to how much may have been laundered through the platform - because until October 2018 ShapeShift did not perform know-your-customer identity checks.

In Coinfirm's own report on risks associated with crypto platforms, ShapeShift was classified as "High risk" with regards to anti-money laundering procedures and compliance because of anonymous usage until the KYC policy began last October.

"Among law enforcement, ShapeShift is regarded as a very helpful and cooperative player," she told CoinDesk.

Then ShapeShift underwent a compliance overhaul throughout the second half of 2018, mandating KYC identity checks for all users and working with three independent analytics firms, Chainalysis, ComplyAdvantage and IDology.

For his part, ShapeShift's Voorhees continues request the WSJ retract the report, which was published in September 2018 during the company's compliance overhaul.