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Analysts have accused the WSJ of using flawed investigative methods when reporting on alleged laundering via crypto exchange ShapeShift.
Blockchain intelligence firm CipherBlade has accused the Wall Street Journal (WSJ) of using flawed investigative methods and thus overestimating the extent of alleged money laundering via crypto exchange ShapeShift. CipherBladeâs analysis of the WSJ report was published in a blog post on March 20.
As reported, the WSJ published a lengthy exposĂ© in fall 2018 that alleged ShapeShift had facilitated the laundering of at least $9 million via cryptocurrencies â purportedly more than any exchange with offices in the United States in the course of the Journalâs investigations.
The WSJ had claimed that the exchange had processed millions of dollars in criminal proceeds, a high proportion of which were purportedly being converted into privacy coins such as Monero (XMR).
At the request of ShapeShift, CipherBlade undertook an extensive analysis of the WSJâs investigation, concluding that the â$9 million âlaunderingâ claim was overstated by a factor of 4xâ given that:
âBy tracing alleged âlaunderingâ through âno more than two intermediaries before reaching an exchangeâ, the WSJâs stated methodology was fundamentally flawed [...] The tracing of any fundsâââillicit or notâââover the course of multiple transactions is extremely difficult, and presenting the total contents of subsequent wallets as illicit is forensically unsound.â
CipherBlade thus states that the WSJâs claims were necessarily distorted, and that a sound forensic method would instead entail a granular tracing of identifiably illicit coins, not a canopy extrapolation to the contents of all associated wallets:
âOf 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 WSJâs claimed $9 million.â
CipherBlade critiques not only the WSJâs technical analysis, but also the data itself, which reportedly does not support their conclusions, even if taken at face value. In regard to the Journalâs claims over privacy coin conversion, CipherBlade notes that:
âOf the 5523 ShapeShift addresses in the WSJâs 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.â
CipherBlade notably focused on alleged laundering using Ethereum (ETH) paths â in some cases involving conversion into privacy coins â and did not scrutinize the Bitcoin-related data used by the Journal.
As previously reported, ShapeShift founder and CEO Erik Voorhees rebutted the claims of the WSJ report shortly after its publication, claiming it was âfactually inaccurate and deceptive,â and that its authors did not have a sufficient understanding of cryptocurrency technology.
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