Bloomberg reported that European Union regulators are investigating crypto exchange OKX, as its decentralized Web3 services were used to launder a portion of the funds stolen from the Bybit hack. OKX has denied the allegations and emphasized that its Web3 wallet is a pure self-custody tool.
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According to the report, European regulators are reviewing OKX's decentralized trading and self-custody services, as the North Korean hacker group "Lazarus Group" used the platform to launder a portion of the $1.5 billion stolen from Bybit.
European crypto regulators are scrutinizing the use of a service offered by OKX, one of the largest digital-asset exchanges, by hackers to launder proceeds from a $1.5 billion heist on trading platform Bybit https://t.co/FfxTy3n1Qw
— Bloomberg Crypto (@crypto) March 11, 2025
Sources indicate that the European Securities and Markets Authority (ESMA) discussed OKX's issues at its Digital Finance Standing Committee meeting on March 6, which was attended by regulators from the 27 EU member states, as well as ESMA and the European Banking Authority (EBA).
Regulators questioned whether OKX's unlicensed tools violate the EU's Crypto Asset Markets (MiCA) regulation. Although MiCA has separate provisions for decentralized applications (dApps), some regulators believe OKX's Web3 services should be subject to MiCA regulations, potentially facing penalties or even losing their MiCA license.
OKX denies allegations: the funds that should be frozen have been frozen
Regarding Bloomberg's report, OKX officially denied on the social platform X that it is under investigation, and emphasized that its Web3 services are "no different" from the products provided by other industry players.
The Bloomberg article is misleading. Like all other major crypto exchanges, OKX provides a self-custody wallet service/swap feature that serves as an aggregator to create efficiency for the users. When Bybit got hacked, we reacted in two ways. (1) We froze associated funds moving… https://t.co/HUUmA8W2eq
— OKX (@okx) March 11, 2025
The company emphasized that they have frozen the Bybit-related funds flowing into their exchange, and are cooperating with law enforcement and Bybit's legal team to provide technical support in tracking the latest fund flows of the hackers.
OKX CEO Star Xu also responded on X: "The OKX Web3 wallet is a pure self-custody software, which is a well-known fact."
For DApps, the OKX Web3 wallet is like Chrome for websites. Even without OKX Web3, users still have hundreds of other wallets to choose from as alternatives.
He believes Bybit's allegations lack a basic understanding of self-custody technology, and emphasized that OKX has implemented technical control measures to block users from restricted countries.
The exchange just obtained a MiCA license in February this year, and if it is revoked due to this incident, it will undoubtedly have a significant impact on its European business.
Bybit hack: Hackers have laundered all the funds
Bybit CEO Ben Zhou had previously stated that at least $100 million in funds had flowed through OKX's Web3 services; however, the vast majority were moved through the decentralized liquidity protocol THORChain and eXch.
Blockchain observer Ember (@EmberCN) analyzed a few days ago that the Lazarus Group has successfully transferred the stolen 499,000 ETH (about $1.39 billion) through dozens of protocols and mixing tools, with the money laundering operation lasting 10 days and leaving almost no trace.
The Bybit hack occurred on February 21 and was one of the largest crypto hacks in history. The hackers breached the infrastructure of Bybit's multi-signature wallet and gained control of the Ethereum cold wallet.
OKX President Hong Fang stated: "Regardless of how the outside world comments, we have always strictly complied with compliance requirements."
OKX faces regulatory storm in the near future
In addition to the MiCA regulatory risk, OKX has also faced other legal challenges recently. The exchange's spot trading volume reached $108.6 billion in February, making it one of the largest crypto exchanges globally.
However, last month, the company's Aux Cayes FinTech subsidiary, which had just been denied authorization to provide services to US customers, pleaded guilty and paid a $84 million fine, and returned $421 million in revenue obtained from US customers. However, this case did not involve any criminal conduct by personnel or customer losses, and was seen as a relatively lenient penalty by the country's Department of Justice.
As regulators tighten their scrutiny of the crypto industry, whether OKX's Web3 business will be subject to the MiCA regulation will be a key factor affecting the future development of the European market.
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