Kraken Says ‘Dust Attack’ From Sanctioned HTX Wallet Locked Out Customers

Crypto exchange Kraken clients were reportedly locked out of their accounts after receiving tiny amounts of sanctioned digital coins. In a statement to Bitcoin Magazine, Kraken said the coins were transferred in what is known as a “dust attack” — when small quantities of cryptocurrency is sent to numerous wallet addresses to track and de-anonymize them. Kraken said the aim of the transactions was to trigger compliance checks by spreading sanctioned funds onto other platforms. Bloomberg first reported the news. “We don’t know who is behind these attacks, but they likely expect that if sanctioned funds land in a client account, it triggers a full account lock, causing operational disruption for a large number of users,” a Kraken spokesperson said. The spokesperson added that its customers were briefly locked out of their accounts but its “compliance team mobilized quickly to restore access while continuing to hold the sanctioned funds as required.” “We are working with authorities to ensure these attacks don’t have their intended impact,” the statement added. A total of 12,000 such transfers were sent from the wallet to addresses linked to Kraken between this month, Bloomberg reported, citing Arkham Intelligence. Arkham identified the wallet as linked to HTX based on addresses the exchange has publicly disclosed as part of its proof of reserves. Chinese exchange HTX, formerly known as Huobi, is one of the world’s biggest crypto exchanges. The European Union sanctioned it in July because it has, according to European authorities, helped “Recent dust attacks from HTX-owned wallets appear to be an attempt to spread UK- and EU-sanctioned funds to other platforms in order to discredit the broader industry,” the Kraken spokesperson continued. Dusting has been happening for years. Back in 2022, someone sent celebrities Ethereum from a Tornado Cash wallet one day after the U.S. Treasury Department sanctioned the coin mixing app used by North Korean state-sponsored hacking groups. Celebrities targeted in the 2022 dusting attack included comedian Jimmy Fallon, YouTuber Logan Paul and Coinbase CEO Brian Armstrong. The feds said they wouldn’t prosecute the celebrities hit with sanctioned crypto.