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From 17 to 24 August, Kraken temporarily disabled trading for several accounts. These were the accounts of traders who had received almost 12,000 unsolicited cryptocurrency transfers to exchange addresses from associated wallets that appeared on sanctions lists. Most of the exchanges were fractions of a cent to a few US dollars.
The exchange described this activity as a “dust attack” to obfuscate the sanctioned funds across multiple unrelated accounts; Kraken later enabled access while holding funds in isolation. It did not identify the sender.
On public blockchains, these actions cannot be prevented on the recipient side, as anyone can send any amount of coins to a known address without the recipient’s consent, allowing unsolicited receipts. Kraken suspects this is what the campaign relied on to trigger reviews of unrelated users.
Arkham Intelligence reportedly attributed the sending wallet to HTX based on addresses that the exchange submitted in a prior proof-of-reserves report, but the attribution did not indicate who controlled the wallet at the time of each transfer.
HTX denied responsibility, declaring that it “absolutely did not engage in such behaviour”, and is investigating whether the problem was caused by mapping problems, operational failures, or malicious behavior by third parties. HTX has, however, not released a detailed breakdown of the wallet activity to determine how those assets could be removed without its assistance.
The incident is notable due to Huobi Global S.A. being sanctioned by the United Kingdom under its Russia sanctions in May, and HTX being subject to increased scrutiny due to sanctions from the European sanctions regime. HTX claimed the sanctions negatively affected its ability to operate.
Unlike standard dustings, which are small transfers to deanonymize wallet owners, the Kraken dusting shows the potential for dusting on a larger scale as a weapon of disruption: every small transfer creates pressure on centralized exchanges to see if the sanctioned entity is exposed.
The issue for crypto compliance teams is that receiving funds is not a sign of intent, and investigations need to look at transaction size, attribution, date/time, and customer behavior. Not all incoming transfers were meant to be voluntary with a sanctioned counterparty.
Kraken and HTX have not disclosed how many customers were restricted, the total value sent unsolicited, or how long each customer’s review process lasted. Neither Kraken nor HTX has disclosed conducting a joint investigation. More definitive explanations would require more attribution at the level of the wallet, further statements from the companies, or action from the U.K. and European sanctions authorities.
Source: <a href="https://bitcoinfoundation.org/news/crypto-companies-news/kraken-hit-by-12000-htx-linked-dust-transfers-as-sanctions-checks-lock-customer-accounts/” target=”_blank” rel=”nofollow noopener”>bitcoinfoundation.org