Crypto Exchange Accountability in Money Laundering and Scam Recovery

Tubrazy Shahid
15 hours ago
4 min read

The International Consortium of Investigative Journalists’ report “Crypto giants moved billions linked to money launderers, drug traffickers and North Korean hackers” reveals a troubling reality in today’s digital asset ecosystem: major cryptocurrency exchanges have been used to move illicit funds on a massive scale. The investigation highlights how platforms like Binance and OKX continued to facilitate high-risk transactions even after regulatory action and compliance oversight. icij.org

This article analyzes those findings from the perspective of a crypto recovery lawyer, explaining the regulatory failures, legal liabilities, and—importantly—the pathways to hope and recovery for victims of crypto scams.

1. ICIJ Findings: A Snapshot of Illicit Flows Through Major Exchanges

According to the ICIJ “Coin Laundry” investigation, tens of thousands of transactions connected to organized crime, human trafficking, ransomware, and state-linked actors flowed through accounts on Binance and OKX—even after prior guilty pleas and compliance agreements. icij.org

Binance continued to receive more than $408 million in tether transfers linked to the Huione Group—a firm tied to organized crime—even while under court-appointed monitors. icij.org
OKX, after pleading guilty to operating an illegal money transmitter and retaining a compliance consultant, still moved over $161 million worth of tainted funds following U.S. Treasury designation of Huione as a money laundering concern. icij.org

The investigation underscores a critical risk: criminal actors exploit weak AML controls, opaque onboarding processes, and inconsistent enforcement to launder illicit crypto through major platforms.

2. Legal Responsibilities of Exchanges Under AML and Securities Law

From a legal perspective, the core regulatory framework that should prevent these outcomes includes:

Anti-Money Laundering (AML) Requirements

Exchanges operating in or serving clients from jurisdictions such as the United States must comply with AML laws that require:

Know Your Customer (KYC) procedures
Suspicious Activity Reporting (SAR/STR)
Continuous transaction monitoring

Failure to implement robust AML controls can lead to criminal charges, civil penalties, or forced compliance programs (as seen with OKX’s guilty plea and multi-hundred-million-dollar penalties). Reuters

Money Transmitter and Securities Regulations

Exchanges may also be subject to laws regulating money services businesses (MSBs) and securities — U.S. regulators (e.g., FinCEN, SEC) classify many platforms as subject to these regimes. Non-compliance exposes exchanges to:

Enforcement actions
Fines and forfeitures
Forced structural reform

This legal framework exists to protect consumers and deter laundering, but the ICIJ investigation shows significant enforcement gaps and operational failures. icij.org

3. Why These Failures Matter for Victims of Crypto Scams

For victims of scams, the implications are severe but actionable:

Illicit funds often move quickly through exchanges, complicating recovery
Exchanges may lack transparency, making civil claims difficult
Law enforcement alone often lacks the resources or jurisdiction to act

However, this does not mean victims are powerless. On the contrary, there are legal mechanisms to pursue recovery.

4. Legal Avenues for Victims: Why a Crypto Recovery Lawyer Matters

A qualified crypto recovery lawyer can leverage several legal tools that go beyond what victims or AI tools can accomplish:

A. Freezing and Preservation Orders

Lawyers can obtain:

Freezing injunctions to prevent dissipation of assets
Discovery and subpoena powers to force disclosure from exchanges

These tools are court-enforceable and can compel exchanges to reveal transaction histories and customer identities.

B. AML/Compliance Compulsion

Through formal legal demands and AML statutes, lawyers can require exchanges to:

Freeze tainted wallets
Provide KYC/transaction records
Report ongoing suspicious transactions

These powers are far beyond what AI guidance or templates can achieve.

C. Civil Litigation Against Facilitators

Victims can file civil claims against:

Exchanges with negligent AML controls
Intermediary services that aided laundering
Operators and affiliates profiting from tainted funds

Experienced counsel can target multiple jurisdictions to maximize recovery potential.

5. Building a Case of Hope: Real Possibilities for Recovery

There is hope for victims of crypto scams—if guided by competent legal counsel:

Victim-Focused Strategies Include:

Forensic blockchain tracing to identify transaction paths
Legal compulsion of exchanges to produce records
Civil or regulatory claims against negligent platforms
Coordination with law enforcement for criminal recovery avenues

No generic guide or AI system can generate enforceable legal demands. Only a lawyer with subpoena power, regulatory authority, and court access can do that.

6. Why AI and DIY Recovery Efforts Fall Short

AI tools and online templates:

Cannot issue legal process
Cannot compel exchange compliance
Cannot file multi-jurisdictional action
Cannot provide client representation

In contrast, a licensed crypto lawyer commands:

Direct access to courts
Legal authority to freeze and seize
Professional responsibility to victims
Collaboration with investigators and regulators

Conclusion: Legal Expertise Is Key to Justice

The ICIJ “The Coin Laundry” findings show how major exchanges can become conduits for illicit finance, exposing victims to deep losses and legal complexity. icij.org

But there are legal remedies and recovery pathways—collectively unlocked only through expert legal counsel. A crypto recovery lawyer does more than interpret data: they can enforce rights, compel evidence, and navigate multi-jurisdictional statutes to pursue meaningful relief.

Disclaimer

The information provided in this article is for general informational purposes only and does not constitute legal or financial advice.

Author & Crypto Consultant

Shahid Jamal Tubrazy (Crypto & Fintech Law Consultant)

Shahid Jamal Tubrazy, a certified top expert in Crypto Law from Duke University, is a leading authority in the cryptocurrency and blockchain space. As a seasoned Fintech lawyer, he offers a full spectrum of services, including licensing, legal guidance for ICOs, STOs, DeFi, and DAOs, as well as specialized expertise in crypto mediation, negotiation, and mergers and acquisitions. With a proven track record and published works on Blockchain Regulation and Cryptocurrency Laws, Shahid provides unparalleled insights into the complexities of the fintech world, ensuring compliance and strategic success. 🌐💼 #CryptoLaw #Fintech #Blockchain #LicenseServices #CryptoMediator #MergersAndAcquisitions #CryptoCompliance #FrozenAssetsrecovery.