In today’s Finshots, we explain the recent investigation into money laundering through crypto that was led by the International Consortium of Investigative Journalists.

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Now, on to today’s story.

The Story

For decades, cryptocurrencies grew on the idea of freedom. Crypto exchanges understood this and made it easier for anyone to enter. You download an app, get verified almost instantly, and suddenly you can send money anywhere in the world within seconds. No forex fees, no gatekeeping, no tedious paperwork. It felt like a financial revolution. One where banks no longer played middlemen and anyone could move money across borders. That was the big promise of blockchain.

But that freedom came with a catch. It didn’t matter whether you were a saint or a sinner. Because behind the polished app interface, quick digital KYC (Know Your Customer), and the promise of borderless money, something darker was happening. The more freely money could move, the more attractive it became to the wrong crowd. And gradually, money laundering found a new playground.

Criminal syndicates, cyber scammers, and even state-backed hacker groups began using crypto exchanges around the world to move illicit funds. And the numbers weren’t small. A cross-border investigation led by the International Consortium of Investigative Journalists (ICIJ) uncovered how billions of dollars were flowing through global exchanges like Binance and OKX, and even Indian exchanges like CoinSwitch, WazirX, ZebPay and more.

Suddenly this wasn’t just speculation. The investigation showed the world just how deep the problem ran.

And because this was a joint investigation, The Indian Express worked with the ICIJ and found close to 27 Indian exchanges involved, with around ₹623 crores siphoned off over two years from about 2,900 victims.

But how did money laundering become so mainstream and why were the exchanges quiet?

To understand that, you need to know how blockchain works.

From the start, the lure of cryptocurrency’s explosive growth has been decentralisation.

Picture a traditional ledger or an accountant’s book where all the entries are stored in one place, controlled by one person. They can change entries, hide mistakes, and no one else would know. This creates plenty of scope for manipulation.

The blockchain flips this idea. Think of a digital ledger shared across thousands of computers around the world. Every transaction becomes part of a “block”, and those blocks link together to form the blockchain. But here’s the thing. Unlike a traditional ledger, you can’t rewrite or delete entries. It’s an immutable record. And that was the whole point of blockchains.

But that’s what made them irresistible to criminal networks. When no one controls the ledger, and no central authority can block a transaction, suspicious transfers often can’t be stopped or reversed. Combine that with the ability to create unlimited wallet addresses, and it becomes the perfect tool for hiding funds.

Over ten months, the ICIJ and 37 global media partners, collectively called The Coin Laundry team, uncovered thousands of transactions routed through major platforms that had direct links to criminal networks.

The trail, however, began earlier. In 2023, Binance pleaded guilty in the US for failing to maintain proper anti-money-laundering controls. Regulators accused it of allowing transactions connected to terrorist groups and cybercriminals. Changpeng Zhao stepped down as CEO, and Binance agreed to overhaul its compliance systems.

Around the same time, OKX admitted to operating as an unlicensed money transmitter for seven years. It was fined $500 million by the US Department of Justice and forced to bring in a court-mandated compliance consultant. But even with new oversight, illicit flows continued. Investigators later found that the platform had received $161 million from Huione, a Cambodia-based network allegedly used by Chinese crime syndicates. In total, about $600 million flowed through Binance and OKX alone, despite fines on the exchanges. The investigation also uncovered roughly 35,000 wallet addresses that were linked to these flows to collect funds from clients.

But it’s not just crime syndicates that have resorted to crypto.

Take North Korea, which allegedly stole about $1.5 billion in cryptocurrency from Bybit, a Dubai based exchange. For a country as heavily sanctioned as it is, blockchain offered a loophole that no international court or law enforcement agency could fully close.

In India, at least 27 exchanges have been flagged as mediums for money laundering, amounting up to ₹623 crores. Here’s how it happened. A user signs up on a crypto platform, thinking they’re buying genuine tokens and hoping for high returns. They deposit real money into a wallet on the platform.

But in many fraud cases, the scam platforms were quietly converting the victims’ deposits into cryptocurrency without their knowledge and routing it through multiple wallets to hide its origins. This process, called layering, is one of the most common steps in laundering money through crypto. It exposed the huge gap between regulation and reality, and showed how regular users often end up holding the short end of the stick.

Which brings us to the inevitable question: why can’t anyone stop them?

Compare a regular stock exchange with a crypto platform and the differences become obvious. A crypto exchange can register in one country, onboard customers from another, and move funds through mixers across dozens of jurisdictions. For the uninitiated, a crypto mixer is a service that takes many users’ cryptocurrency, blends it together, and redistributes it to new wallet addresses, making it far harder to trace where funds came from or where they went. So even if authorities track a suspicious wallet, the money may have bounced across continents by the time they catch up.

Which brings us to the next problem. The investigation found that even when exchanges complied with court orders, their systems weren’t equipped to trace the sheer number of wallets and transactions. Think less “needle in a haystack” and more “suspicious hay stick in a hay farm”.

And unlike regular stock exchanges, crypto platforms can simply pick countries with lighter scrutiny. With some nations embracing crypto and others banning it outright, you end up with a patchwork of grey zones where platforms face fewer questions. Some do it for tax reasons too. India’s Finance Ministry found that 17 crypto exchanges evaded GST worth ₹824 crores, of which only ₹122 crores had been recovered by December 2024.

Now that makes you wonder, where do we go from here?

There’s plenty of talk about regulation, but honestly, the first line of defence is awareness. Chances are we all know at least one ‘crypto bro’ who can pitch ten coins in under a minute, but ask them how blockchain works and it’s radio silence.

That’s because regulation only goes as far as the parties involved. Even if exchanges comply, they can’t save every user from fraud. Crypto isn’t like a bank account where a mistaken transfer can be reversed. It’s decentralised, irreversible, and extremely technical. And because of that, the people who know the least often lose the most.

This is why exchanges need stricter penalties for operating with poor compliance. Real-time monitoring — the kind Binance and OKX agreed to — should become a global standard. Not because crypto is dangerous, but because the risks demand stronger guardrails than traditional markets.

For users, due diligence matters. Study the tokens you buy, just like you would stocks or mutual funds. In equities, you look at real businesses and real value. Crypto should be no different.

And just like you’d check whether a brokerage is licensed before opening a demat account, you should check whether a crypto exchange is regulated (again, that’s still a grey zone in India), compliant, and trustworthy. In a world where exchanges can pop up overnight, this step becomes even more crucial.

The big question now is whether crypto exchanges can truly reform or whether the broader system needs a rethink to prevent becoming a global laundering pipeline. Because even if exchanges tighten compliance and regulators write new rules, the underlying architecture remains the same: decentralised, borderless, irreversible. Built for freedom, not policing.

And that’s where awareness comes in. You need to know what you’re buying, how exchanges work, and why the red flags in crypto look different from those in traditional markets. Education doesn’t eliminate crime. But it protects you from becoming collateral damage in someone else’s laundering scheme.

Until then…

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