{"id":532355,"date":"2022-12-29T16:00:00","date_gmt":"2022-12-29T13:00:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/blockchain-analytics-unable-to-prevent-ftx-level-illicit-schemes\/"},"modified":"2022-12-29T16:00:00","modified_gmt":"2022-12-29T13:00:00","slug":"blockchain-analytics-unable-to-prevent-ftx-level-illicit-schemes","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/blockchain-analytics-unable-to-prevent-ftx-level-illicit-schemes\/","title":{"rendered":"# Blockchain analytics unable to prevent FTX-level illicit schemes"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a2adfcfcd521\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a2adfcfcd521\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/blockchain-analytics-unable-to-prevent-ftx-level-illicit-schemes\/#%E2%80%9D_Blockchain_analytics_unable_to_prevent_FTX-level_illicit_schemes_%E2%80%9C\" >&#8221; Blockchain analytics unable to prevent FTX-level illicit schemes &#8220;<\/a><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9D_Blockchain_analytics_unable_to_prevent_FTX-level_illicit_schemes_%E2%80%9C\"><\/span>&#8221; Blockchain analytics unable to prevent FTX-level illicit schemes &#8220;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<p><img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjItMTIvNTkwNjQ2YzgtNDJhYS00Y2Q1LTg3ZWQtZjQ3MDZmMTEyNDdiLmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-02fa634a>Data transparency has been a focal point for the crypto industry, but the FTX fiasco has shown that centralized exchanges (CEX) are not transparent enough. So far, crypto analytics firms are <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>arently not capable of tracking transactions to prevent collapses like FTX.<\/p>\n<p>All Bitcoin (BTC) transactions are available publicly on-chain, which enables tracking such transactions when sending crypto from one address to another. However, this is not the case when it comes to interacting with a centralized crypto exchange.<\/p>\n<p>Cointelegraph spoke with executives at blockchain intelligence firms, including Chainalysis, Nansen and Whale Alert, to learn more insights about tracking illicit CEX transactions on-chain.<\/p>\n<p>According to Chainalysis, a major blockchain data platform that cooperates with many governments across the world, there is currently no on-chain tracking tool that could trace funds through a CEX.<\/p>\n<p>\u201cChainalysis \u2014 or any other blockchain analysis tool \u2014 can\u2019t trace funds through a centralized service, because the way that these services store and manage funds deposited by users inherently makes further tracing inaccurate,\u201d a spokesperson for Chainalysis told Cointelegraph.<\/p>\n<p>\u201cEven if you could trace through a centralized exchange, on-chain analysis alone cannot reveal fraudulent intent behind transactions,\u201d Chainalysis\u2019 representative noted. The spokesperson stressed that Alameda\u2019s leaked off-chain balance sheet was the first thing to reveal that something was wrong.<\/p>\n<p>While blockchain analysis can track deposits on CEXs, there is no chance to access their liabilities, according to Nansen analyst Andrew Thurman. \u201cFTX halted withdrawals when they still had in excess of a billion in various digital assets; we now know they had a far greater sum in liabilities,\u201d he said.<\/p>\n<p>Thurman also argued that a proof-of-reserves (PoR) model \u2014 the increasingly popular effort of CEXs to prove transparency \u2014 is \u201conly a half measure, but it\u2019s a good one.\u201d<\/p>\n<p>Despite blockchain analysis having limited opportunities in tracking illicit transactions by CEXs so far, some monitoring services still try to prove that the industry has chances to prevent issues like FTX crash one day.<\/p>\n<p>\u201cWe are currently doing historical balance checks on our known FTX addresses \u2014 deposit and other related addresses \u2014 to determine if this could have been spotted sooner,\u201d Whale Alert co-founder and CEO Frank van Weert told Cointelegraph in November.<\/p>\n<p>Whale Alert has since had to abandon the project because the platform did not have enough resources to properly do the scan of about two years of data. \u201cIt takes quite a bit of computing power which we did not have available,\u201d the CEO said.<\/p>\n<p>Weert also noted that \u201cit is possible to track exchanges,\u201d but platforms like Coinbase and FTX make it a bit more complex to track incoming coins as they don&#8217;t use hot wallets. He added that exchanges are \u201cextremely reluctant to cooperate,\u201d with many of them declining to comment on Whale Alert\u2019s findings for &#8220;security&#8221; reasons.<\/p>\n<p><strong><em>Related: <\/em><\/strong><strong><em>What blockchain analysis can and can&#8217;t do to find FTX&#8217;s missing funds: Blockchain.com CEO<\/em><\/strong><\/p>\n<p>Whale Alert CEO emphasized that the entire crypto industry is responsible for the collapse of FTX, stating:<\/p>\n<blockquote><p>\u201cSo far the industry&#8217;s focus has been on profit rather than proper infrastructure. The only way to recover from the mess is to gain the public&#8217;s trust again on the basis of proper transparency, which does not come from Merkle Tree audits.\u201d<\/p><\/blockquote>\n<p>According to some industry executives, blockchain analysis platforms are not interested in catching illicit players on-chain in the first place.<\/p>\n<p>\u201cFirst, blockchain analysis doesn\u2019t really do anything, and second, they are not focused on fraud and suspicious transactions at the exchange level. Their customers are the exchanges and you don\u2019t bite the hand that feeds you,\u201d Bitcoin proponent Samson Mow told Cointelegraph.<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/blockchain-analytics-unable-to-prevent-ftx-level-illicit-schemes\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8221; Blockchain analytics unable to prevent FTX-level illicit schemes &#8220; Data transparency has been a focal point for the crypto industry, but the FTX fiasco has shown that centralized exchanges (CEX) are not transparent enough. So far, crypto analytics firms are apparently not capable of tracking transactions to prevent collapses like FTX. All Bitcoin (BTC)&#8230;<\/p>\n","protected":false},"author":1,"featured_media":532356,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/cdn-cgi\/image\/format=auto,onerror=redirect,quality=90,width=1200\/https:\/\/s3.cointelegraph.com\/uploads\/2022-12\/590646c8-42aa-4cd5-87ed-f4706f11247b.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[79806,74862,74894,74860,135234,72366],"class_list":["post-532355","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-analysis","tag-bitcoin","tag-blockchain","tag-cryptocurrency-exchange","tag-ftx","tag-data"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/532355","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=532355"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/532355\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/532356"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=532355"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=532355"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=532355"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}