Has Huione Reduced Its Fund Risk After Declining to Guarantee Certain Illegal Transactions?
Huione Group is a large financial corporation based in Cambodia, with business divisions covering cryptocurrency wallets, payments, transaction guarantees, insurance, and cryptocurrency exchanges. Due to its relatively lax KYC and KYT requirements, criminals have widely used anonymous USDT through the platform for illegal activities such as fraud and money laundering, turning its business addresses into contamination sources for risky crypto funds.
In Q3 this year, Huione Group announced that it would no longer guarantee certain illegal activities and published six new guarantee deposit addresses. This article aims to audit these new and old addresses to determine whether Huione has genuinely upheld its promise.
Huione Guarantee Draws a Clear Line on Its Operations
Located in Southeast Asia, Huione Guarantee’s business overlaps with notorious organized crime groups in the region. As a result, its business addresses have been affected, receiving a significant amount of cryptocurrency linked to illegal activities, drawing widespread international attention.
Huione Guarantee has long dismissed these issues with a disclaimer, stating it does not participate in or know the specific businesses of its clients, and as a guarantor, it only ensures both parties complete their transactions. Details of the funds or goods are communicated directly between buyers and sellers, and Huione neither verifies nor guarantees their sources. If there is an issue with the origin of funds or goods, or if the purchased goods are used for illegal activities, Huione Group assumes no liability.
However, Huione Group faced backlash in July this year. According to a Bitrace investigation, Huione Group’s payment business (HuionePay) had one of its addresses frozen by Tether after receiving 29.62 million USDT linked to thefts from the DMM and Poloniex exchanges. This amount represented approximately 75% of HuionePay’s reserves at the time, leading to withdrawal pressure from users and operational challenges for the platform, serving as a wake-up call for Huione.
Following this freezing incident, Huione Guarantee added a special notice on its website, stating it will not guarantee transactions involving serious criminal activities such as cryptocurrency theft, human trafficking, drug trading, arms dealing, terrorism, as well as U.S.-related financial flows and cross-chain mixing services.
Huione Guarantee has now clearly defined the boundaries of its business. Its stance on high-risk activities has shifted from ambiguity to outright refusal, signaling a move toward strengthening compliance to avoid illegal activities and potential legal risks.
Evaluating the Effectiveness of Huione’s Statement Through Data
Has Huione Guarantee’s public stance against high-risk funds been effective in improving its compliance? Bitrace audited the six newly disclosed business addresses and compared them to previous addresses to observe changes in high-risk fund inflows before and after Huione’s statement.
The six guarantee addresses include: TX36xR, TVf2Na, TYQLMe, TKBiAw, TFMp4o, TU7X7b.
From July 16, 2023, to October 13, 2024, Huione’s old address TL8TBp received over 2.244 billion USDT, with high-risk funds amounting to 173 million USDT (7.70%). In contrast, the new addresses received over 300 million USDT from July 16, 2024, to October 13, 2024, with high-risk funds totaling 8.14 million USDT (2.70%). This shows a significant reduction in the proportion of high-risk funds.
Breaking down the high-risk funds by category, funds from illicit activities such as black/gray-market have improved considerably, dropping from 7.63% to 2.61%. Inflows from money laundering, gambling, and fraud have also noticeably decreased.
Moreover, Bitrace calculated the proportion of high-risk funds for both the new and old addresses across different time periods. TL8TBp saw 6.68% of its total funds being high-risk from July 16, 2024, to October 13, 2024, slightly higher than the same period last year but lower than during the full audit period.
The data clearly indicates that high-risk fund inflows have improved for both old and new Huione Guarantee addresses, likely due to stricter business participation requirements.
However, it is worth noting that these new business addresses have not been in operation long enough, and the data available may not fully reflect Huione Guarantee’s progress in compliance. Bitrace will continue to monitor the situation.
The Importance of KYT
As the cryptocurrency industry grows and risky funds proliferate, Web3 institutions are facing increasing compliance pressure. A lack of ability to identify fund risks associated with platform users could impact business operations and even lead to investigations.
Know Your Transaction (KYT) is an essential tool for cryptocurrency companies to ensure safe and compliant operations. It helps prevent illegal activities, safeguard users’ assets, and enhance platform reputation.
Integrating KYT into business processes not only helps companies identify and block illegal fund flows but also demonstrates a commitment to compliance. For any risk management personnel in need of KYT, you can contact us through multiple channels to request a demo.
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