ZachXBT: Politicians Leading the Peak of Crypto Crime, Where Hacking is More Profitable than Serious Development

With On-Chain Data Becoming Increasingly Transparent, the Crypto Industry Faces Its Darkest Moral Valley

On-chain detective ZachXBT recently published a post pointing out that the crypto space has entered a “supercycle of crime.” Politicians are leading the issuance of tokens, courts are dismissing multiple controversial lawsuits, and protocol developers are turning a blind eye to hackers laundering money. He expresses concern that the corruption within blockchain could render numerous on-chain ecosystems unsustainable.

Crime Prevails: Protocols Turn a Blind Eye to Illegally Obtained Funds

ZachXBT criticizes that the rules of today’s crypto world have been turned upside down, with crime entering a supercycle that is more rampant than ever before. He points out: “Some protocols witness over 50% of on-chain activity coming from stolen funds, yet the teams choose to pocket transaction fees and do nothing.”

(Hyperliquid, a laundering tool, may face regulatory concerns? Cybersecurity team: James Wynn is also part of the same crowd)

Taking the North Korean hacker organization Lazarus Group as an example, Zach reveals that they have successfully utilized small OTC trading firms and certain mixing or privacy protocols to launder money from multiple hacking incidents, including Bybit, DMM Bitcoin, and WazirX, and this matter has been left unaddressed:
I estimate that the scale of illegal funds circulating on the Tron chain is at least 5 to 10 billion dollars, most of which are difficult to trace.
After all, compared to reporting to regulators or freezing black money, development teams care more about maintaining data performance and revenue sources. In the face of profit, morality has clearly been selectively ignored.

Fraud Justified, Regulation Allows KOLs to Lead the Harvesting

Not only hackers, but Zach also names the collusion between the community and KOLs (Key Opinion Leaders). He states that for many years, countless influencers and KOLs have not disclosed their promotional compensation from projects, which is actually illegal in most jurisdictions, yet this continues to happen:
Government agencies could impose fines on all KOLs or projects that have never disclosed paid advertising over the years, earning between 50 million to 100 million dollars. If they spent their time on regulation rather than chasing open-source developers or decentralized protocols, the situation might improve.

He admits, “This situation is prevalent simply because there has never been a truly serious consequence.”

(China’s community platform has undergone the largest purge of crypto influencers since May 19! Many KOLs and group chats have been banned)

The logic behind this behavior is brutal and realistic; without legal consequences, the likelihood of stopping it in the short term is almost nonexistent.

Does Blockchain Illuminate the Darkness or Amplify It?

In the face of various scandals in the crypto industry, some users question whether blockchain has only made crime more rampant without providing clearer insights. Zach responds:
Both, on-chain is indeed very transparent, but there is so much money in this field that some who were not prepared suddenly become complacent, reckless, and dismissive of risks, providing hackers with many free opportunities to profit.
On the other hand, as Tayvano, the founder of MyEtherWallet, puts it, perhaps the reward system within the crypto realm has deviated from its proper course, with those doing legitimate work facing legal sanctions, while those behind rug pulls roam free:
I do not believe things will change unless serious developers who create new value can receive more rewards than those who extract value and transfer it meaninglessly.
Therefore, she believes that the crypto field will attract more antisocial, selfish, and corrupt individuals, while honest, cooperative, and self-sacrificing builders will be marginalized and suppressed. This no longer seems to be a suitable place for creating the future.

(In the wake of ABCDE Capital’s exit: As VCs step down, does crypto still have a future worth building?)

The Cost of Short-Term Profits Is the Collapse of Long-Term Trust and Structure

Finally, Zach points out a paradoxical phenomenon: “Right now, it is actually the most profitable time to do bad things,” but this tragically symbolizes that the industry is at its most dangerous turning point.
Reflecting on the narrative of the past six months with no novelty, the token launch platform Pump.fun has generated an astonishing revenue of 700 million dollars to date, becoming a pure value-extraction gambling platform:
Whether you like it or not, gambling remains the primary use case in this industry.
Zach candidly states that people are more enthusiastic about replicating arbitrage models than solving problems. This not only makes fraud more prevalent but also causes the entire crypto world to lose the core values of “decentralization, trust, and innovation” that it was initially built upon.

Risk Warning

Investing in cryptocurrencies carries a high level of risk; their prices can be extremely volatile, and you may lose all your principal. Please carefully assess the risks.