HTX sanctions made risk score 'meaningless,' ZachXBT says, advises users to obfuscate crypto
The UK's HTX sanctions have turned into a headache for on-chain investigators, who say wallet-risk scores now catch too much to mean much.
The UK's sanctions against crypto exchange HTX are now spilling across the crypto space, turning old wallet history into a new access problem and making some on-chain investigators say risk scores are catching too much to be useful.
ZachXBT, the pseudonymous on-chain investigator known for tracing crypto hacks and thefts, says the UK's sanctions against HTX have made sanctions-based wallet risk scores effectively useless after ordinary exchange users started getting caught in broad address taint.
- The comments came after the UK imposed sanctions against Huobi Global S.A., also known as HTX, under its Russia sanctions regime in late May.
- The label has since leaked far beyond HTX itself, with some DeFi users saying old exchange exposure is now getting their wallets blocked by frontends and screening tools.
"Recent UK crypto sanctions seem to be a bit of an overreach," ZachXBT wrote Sunday on X, pointing to HTX's large Asian retail user base as one reason broad address taint has become messy. Treating old exposure as high-risk, he argued, now sweeps in too many non-sanctioned wallets.
ZachXBT
He also said compliance tools are failing to separate activity before and after sanctions, making wallet labels less useful for investigators trying to follow real illicit flows.
Taylor Monahan, co-founder of MyEtherWallet and a longtime crypto security researcher, made a similar complaint, saying in an X post the HTX sanctions had "single-handedly undone years of work" to get DeFi protocols and swap services to screen stolen funds.
"HTX users are an insanely diverse set of people. Some criminals. But most are legit," Monahan wrote, adding that the UK's move had created more spillover damage for regular users than Tornado Cash sanctions.
The taint contagion
The problem has already shown up around Hyperliquid, a decentralized perpetual futures crypto exchange and Layer-1 blockchain. Some users have said the platform's official frontend blocked their addresses after third-party screening tools flagged past HTX exposure as high risk, The Coinformer reported earlier.
One user, posting under the handle @0xasrequired, replied to ZachXBT and said they had used HTX before the sanctions and a few times afterward without knowing about the designation. The user said they only learned about the issue after Hyperliquid's frontend blocked them.
ZachXBT's reply turned the debate from bad screening into a sanctions-workaround question.
"You need to transfer your funds to a new wallet address several hops away and use decentralized bridges / exchanges so you obfuscate your source of funds," the on-chain sleuth wrote.
ZachXBT's argument is that the UK's HTX action has made those flags less meaningful. He contrasted HTX with earlier sanctions targets such as Huione, Blender and Hydra, saying those businesses typically had a high share of illicit activity, while HTX has many ordinary exchange users.
He also claimed the UK had missed a "legit $1.25B laundering case" while sanctioning HTX.
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The UK's HTX sanctions have turned into a headache for on-chain investigators, who say wallet-risk scores now catch too much to mean much.