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Blockchain analyst ZachXBT has raised serious concerns over Garden Finance, alleging that more than 80% of its fee revenue is linked to laundering activities connected to high-profile crypto thefts.
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The accusations challenge Garden Finance’s claims of decentralization and trustlessness, igniting debate over the platform’s operational transparency and security.
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According to ZachXBT, “You conveniently left out >80% of your fees came from Chinese launderers moving Lazarus Group funds from the Bybit hack,” highlighting the gravity of the allegations.
Garden Finance faces scrutiny as blockchain expert ZachXBT exposes alleged laundering of Lazarus Group funds, questioning the platform’s decentralization claims and fee sources.
Allegations of Laundering Undermine Garden Finance’s Decentralization Claims
In a detailed investigation, blockchain researcher ZachXBT accused Garden Finance—marketed as “the fastest Bitcoin bridge”—of facilitating illicit fund flows tied to the notorious North Korean Lazarus Group. The claim centers on the assertion that over 80% of Garden Finance’s recent fee income originates from laundering proceeds of the Bybit hack, a major crypto theft incident. This revelation casts doubt on the platform’s narrative of operating a fully decentralized and trustless cross-chain swapping service.
Garden Finance’s model relies on centralized liquidity pools, notably the cbBTC liquidity sourced from Coinbase. ZachXBT observed a single entity repeatedly replenishing this liquidity, which he argues contradicts the project’s decentralization claims. The continuous topping up of liquidity by one actor suggests a centralized control mechanism that could be exploited for laundering purposes, raising red flags about the platform’s governance and oversight.
Founder’s Response and Platform Metrics
Garden Finance co-founder Jaz Gulati responded to the allegations by emphasizing that a significant portion of the platform’s fees—approximately 30 BTC—were accrued before the Bybit hack, suggesting that the accusations overlook legitimate revenue streams. Gulati dismissed the “fake decentralized” label as misinformation, reaffirming the project’s commitment to zero-custody risk and rapid cross-chain swaps.
According to data from Dune Analytics, Garden Finance has processed over 24,984 BTC in volume through 40,571 atomic swaps, generating 40.11 BTC in fees to date. The platform touts its ability to complete swaps within 30 seconds, with the largest single swap recorded at 10 BTC. Despite these impressive figures, the recent scrutiny highlights potential vulnerabilities in the platform’s liquidity management and compliance frameworks.
Broader Implications: Crypto Laundering and Regulatory Challenges
The allegations against Garden Finance underscore a growing concern within the crypto ecosystem regarding the exploitation of decentralized finance (DeFi) platforms for illicit activities. Laundering through centralized liquidity pools complicates regulatory oversight and challenges the effectiveness of existing anti-money laundering (AML) measures. As decentralized protocols gain traction, ensuring transparency and robust compliance mechanisms becomes paramount to maintaining investor confidence and regulatory acceptance.
Recent High-Profile Crypto Laundering Cases
The Garden Finance controversy is part of a wider pattern of crypto laundering incidents. Recently, Iurii Gugnin, founder of Evita Pay, was arrested in New York on charges related to a $530 million money laundering scheme involving stablecoins and sanctioned Russian banks. This case highlights the persistent risks associated with crypto payments and the necessity for enhanced regulatory scrutiny.
Authorities allege Gugnin’s operation enabled clients to circumvent sanctions and access sensitive technologies, demonstrating how crypto infrastructure can be manipulated for illicit purposes. These developments reinforce the importance of vigilant monitoring and enforcement within the crypto space to prevent abuse and protect market integrity.
Call to Action for Enhanced Transparency and Compliance
Given the complexities revealed by ZachXBT’s findings, Garden Finance and similar platforms are urged to increase transparency regarding their liquidity sources and transaction monitoring practices. Implementing rigorous AML protocols and engaging with regulatory bodies can help mitigate risks and foster a safer environment for cross-chain transactions. Users and investors should remain vigilant, conducting thorough due diligence before engaging with emerging DeFi services.
Conclusion
The allegations against Garden Finance highlight critical challenges at the intersection of decentralization, liquidity management, and illicit activity prevention within the crypto sector. While the platform boasts rapid, trustless swaps and significant transaction volumes, the potential involvement in laundering Lazarus Group funds calls for closer scrutiny and enhanced compliance efforts. As regulatory frameworks evolve, maintaining transparency and safeguarding against misuse will be essential for the sustainable growth of decentralized finance.
