$96B Laundered? Crypto Exchange Garantex Returns as Grinex, Moves $60M Despite Sanctions!

Russian cryptocurrency exchange Garantex has reemerged as Grinex, even after strict international sanctions. The exchange, which was formerly sanctioned for participating in crypto laundering tactics, has sent millions of dollars to Grinex, enabling the latter to remain active despite legal bans. The action has raised questions regarding the efficacy of global enforcement actions to counter illegal activities in the crypto market.

Garantex’s History and Sanctions

The United States Treasury’s Office of Foreign Assets Control (OFAC) sanctioned crypto exchange Garantex in April 2022 for engaging in crypto laundering strategies linked with cybercrime groups. Investigations found that the exchange engaged in over $96 billion in illicit transactions and, therefore, held a central position in illegal financial activities. Yet even after these sanctions, the exchange continued to find ways around them through the use of decentralised finance (DeFi) methods and hidden blockchain transactions.

Earlier this month, U.S., German, and Finland authorities together froze $28 million of assets belonging to Garantex, taking over its domains in a bid to close it down. Additionally, stablecoin issuer Tether (USDT) froze $27 million, disrupting withdrawal services. Despite this, new evidence suggests that the exchange had already rebranded itself as Grinex, with liquidity and customer funds transferred to the new platform.

A Swiss blockchain analytics firm discovered that over $60 million worth of ruble-backed stablecoins (A7A5) was laundered and funnelled into Grinex. The strategic use of one-time-use wallets and advanced crypto laundering strategies helped the exchange stay under the radar during the transition.

Crypto Exchange Garantex’s Connection to Grinex

Despite its official shutdown, Garantex has maintained its user base and financial operations. Investigators have identified multiple on-chain and off-chain connections between the two platforms, including:

• The systematic transfer of A7A5 stablecoins between Garantex and Grinex.
• The use of burning and minting mechanisms to launder funds and make new stablecoins appear “clean.”
• Mirrored transactional patterns and trading behaviours matching those of Garantex.
• A Russian crypto tracking site lists Grinex’s founders as the same individuals behind Garantex.

Reports suggest that customers are also physically visiting exchange offices to move funds from Garantex to Grinex, reinforcing the belief that this is not an independent exchange but rather a direct successor.

Regulatory Challenges in the Crypto Industry

The fact that crypto exchange Garantex could rebrand and operate despite harsh sanctions indicates the difficulty regulators are having in regulating crypto money laundering. Despite the crackdown on the exchange, it was able to sustain user confidence and financial stability by merely changing its name.

The U.S. Department of Justice (DOJ) has noted Garantex as a key player in ransomware funding, supporting operators like Conti and Black Basta, as well as darknet marketplaces like Hydra. Law enforcement worries that Grinex will immediately pick up the same criminal activities, following the trend of closure exchanges being shortly replaced by successive platforms.

To combat crypto money laundering effectively, regulators believe strict control, transparent compliance measures, and more advanced blockchain monitoring capabilities are needed. The quick growth of the crypto space, however, complicates enforcement since exchanges always seem to find a way to get around the rules.

Final Thoughts: What’s Next for Grinex and the Crypto Industry?

The Garantex rebranding to Grinex case shows the resilience of illicit crypto networks. As much as law enforcement has been able to shut down illegal exchanges, the development of successor platforms remains a persistent challenge.

Moving forward, transparent compliance measures and improved crypto laundering detection tools will be essential in combating crypto money laundering within the crypto industry. The fate of Grinex remains uncertain, but global regulators will closely monitor its activities to prevent another massive financial crime operation.