Karma goes all the way around, doesn’t it?
eXch, a privacy-focused crypto mixing protocol, has announced it will cease operations on May 1, 2025, following intense backlash for allegedly aiding the Lazarus Group in laundering funds from the $1.4 billion Bybit hack. The platform, which has been accused of facilitating the biggest crypto heist ever, was accused of allegations that have led to its shutdown under community outrage and governance controversy.
The Bybit hack saw the hackers use multiple platforms to launder stolen monies, with one of the leading names mentioned for money laundering being eXch. A blockchain analyst reported a suspicious surge in eXch’s activity, processing 20,000 ETH in 24 hours compared to its usual 800 ETH, while Bitcoin reserves vanished and ETH reserves jumped 900%. eXch initially denied wrongdoing, stating, “We don’t launder money for Lazarus or DPRK. This is an attack on blockchain privacy by those who oppose decentralization.” The platform dismissed critics as enemies of privacy coins, insisting its operations were legitimate.
The crypto community rejected eXch’s defense, with many calling for boycotts and legal action for allegedly facilitating money laundering. Unlike eXch, Chainflip, used by Lazarus, immediately banned hackers’ wallets and shut off its interface to prevent damage. THORChain, similarly impacted, was internally conflicted on freezing illicit funds and lost contributors by becoming criticized for doing nothing. One past THORChain participant stated, “When your platform handles funds stolen by North Korea in a historic hack, it’s no longer just about decentralization, it’s a security issue.”
eXch doubled down, arguing that blocking funds was a flawed anti-money laundering tactic and that “privacy is not a crime.” It claimed its closure wouldn’t stop laundering, as bad actors would find alternatives. These arguments failed to sway the community, leading to a governance vote where most chose to shut down. In its final statement, eXch softened its stance: “We never intended to support illegal activities like money laundering, as we’re accused of now.”
Bybit, despite recovering, recently closed five Web3 services, hinting at ongoing fallout. eXch’s closure highlights the clash between privacy and accountability in crypto, showing how community pressure and high-profile hacks can reshape the industry’s landscape.
