The new year looks set to be tumultuous for Chainalysis. In addition to the trial of Roman Sterlingov set to begin on February 12, which calls into question the reliability of Chainalysis Reactor in a multi-million dollar money laundering allegation, Chainalysis is now being sued by crypto project YieldNodes.
In their Crypto Crime Report 2023, Chainalysis has alleged that YieldNodes, a Hong Kong-based project that rents computing power to participate in a masternode pool, is a scam. In its crypto scam activity summary chart, Chainalysis described YieldNodes as the second largest crypto scam by 2022 revenue with a total of $341.6 million. Notably, Chainalysis’ chart failed to detect FTX, one of the biggest crypto scams to date having hijacked $8 billion in customer funds.
“They never tried to contact us before releasing their report, and when we tried to contact them to discuss their report, all they did was direct us to their sales representatives and try to sell us licenses for their software,” writes YieldNodes in their report. newsletter.
The categorization of Chainalysis had devastating consequences for YieldNodes’ business, as participants were not allowed to deposit and withdraw profits from exchanges. Reputational damage continued to ensue as Chainalysis’s claims spread across the media, leading to the deletion YieldNodes products from trading platforms.
In a short statement, YieldNodes told me that they only discovered Chainalysis’s categorization after receiving transaction errors from participants. YieldNodes now accuses Chainalysis of putting “marketing before reliability,” citing the admitted lack of scientific evidence for their flagship product, referring to the absence of false positive rates, false negative rates and margin of error rates.
In July, YieldNodes encouraged plans to join a potential class-action lawsuit against Chainalysis, citing the company’s size and the costs associated with challenging Chainalysis’s claims in court. Chainalysis, founded in 2014, is a blockchain surveillance company offering its products to exchanges, financial institutions and law enforcement agencies, including ICE, IRS, FBI, SEC and DEA. Chainalysis received more than $3.3 million from InQTel, the nonprofit venture capital arm of the CIA, since 2020.