TL;DR Breakdown
- Crypto holders caught in a crossfire between Chatex and US authorities on money laundering claims.
- The exchange’s customers now want the US treasury to return their holdings.
On Nov. 9, 2021, the Chatex crypto exchange platform was no longer offering withdrawal services to its customers due to US investigations. The US was investigating the platform for its collaboration with an OTC firm Suex suspected of money laundering. Washington DC had announced sanctions for Suex in July, making Chatex a suspect later.
As a result, the US issued sanctions against the platform. The affected clients want their crypto funds back. However, these holders’ probability of receiving their money back anytime soon is slim even though they did nothing wrong.
The US labels platforms as money-laundering vehicles
The US said that Suex and Chatex are money laundering schemes that facilitate a crypto exchange service for funds from ransomware attacks. Per the OFAC press release, exchanges like Chatex help in the profitability of cyber attackers by laundering money for them.
However, Suex and Chatex co-founder Egor Petukhovsky said his organizations are not wrongdoers and resigned from being the Chatex damage control. However, his claims did not help as the US ordered the platform’s suspension, affecting about 370,000 clients.
The US ordered the closure of the whole exchange even though only 30 addresses were on their denylist. Now the innocent holders want to cash out their frozen money and are asking the US authorities to approve their move.
Per legal advice given to one of them, innocent users should apply for a specific license. This license is a unique protocol that allows for the approval of cashouts from frozen accounts for innocent users. A publish from OFAC now says that any US crypto service has a choice to block individual wallets or consolidate them. However, that service must be ready to refund the holdings to their owners after OFAC’S approval.
Reactions follow Chatex’s sanctions
After the US said it was sanctioning Chatex for financial foul play, many started airing their reactions on the issue. The exchanges received a backlash after all companies that were their associates announced the cancellation of their deals. These companies include Bitgo, which instantly froze all of the exchange’s crypto wallets. Other companies like Google, Cloudflare, and Crystal Blockchain also withdrew their services.
Per Benjamin Hutten, a lawyer at Buckley LLP, the exchange’s users will face a tough time while trying to cash out their frozen holdings. He added that since the sanction against Suex and Chatex is government-backed, much scrutiny will occur before any withdrawal. He noted that Chatex may not get involved in the refunding process since OFAC is strict with such permits.
Hutten also said that OFAC might reach out to individual clients and determine why they wanted to use Chatex. This vetting process would be necessary to decide on the legitimacy and final fate of the whole exchange.
The exchange users are also determined to receive their holdings no matter what OFAC decides. One user said she would try to reach out to the Russian and European authorities if the US fails to help her repossess her cryptos.
