Investigator Shows How Poor Crypto Exchange KYC Can Empower Criminals
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Public company investigator Aurelius Capital Value called out Silvergate for doing business with Huobi Global, despite earlier proof of the exchange’s poor KYC enforcement.
Aurelius used Huobi’s alleged history of facilitating money laundering and a 2020 experiment demonstrating the ease of creating bogus accounts to suggest that Silvergate’s vetting process was deficient.
KYC Due Diligence at Silvergate Questioned
In a Twitter thread, Aurelius questioned Silvergate’s partnership with Huobi Global after a 2020 experiment by forensics firm Cipherblade.
The experiment revealed the ease of creating fake accounts by submitting photoshopped celebrity images as ID photos. In 2021, authorities in Thailand and China cracked a $124 million money-laundering syndicate that exploited Huobi’s lax controls.
Silvergate Bank became the bank of choice for about 1,600 of the most significant crypto firms by 2019. Its Silvergate Exchange Network specializes in converting between crypto and fiat money.
Researchers also discovered troubling connections between Huobi and darknet marketplace Hydra and couldn’t reconcile Silvergate’s official due diligence process with the apparent deficiencies in Huobi’s onboarding process.
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