Blockchain forensic firm Elliptic noted that 1inch has become popular among bad actors due to its design as an aggregator.
Decentralized exchange (DEX) aggregator 1inch is now the “most used service for laundering funds” from illicit activity in the world as decentralized finance (defi) applications have become a focal point for criminal activity.
In a now-deleted blog post (still available in Google web cache), more than $322 million of illicit funds went through 1inch’s contracts since 2019.
Researchers at the blockchain firm attribute this inflow of funds to the protocol’s design, saying that 1inch was initially made to work as an aggregator to interact with other DEXs’ liquidity pools to optimize cross-asset swaps.
Elliptic pointed out that 1inch’s recent updates also help cybercriminals hide their tracks, saying that criminals can now instantly swap their illicit funds at scale using limit orders, a functionality that was introduced in 2021 by the 1inch team.
However, 1inch is not the only DEX used by bad actors. Other decentralized applications are also exploited by terrorist organizations to move funds, analysts say.
For instance, Elliptic claims that wallets associated with the Palestinian Islamic Jihad organization, a Sunni Islamist militant group, use TRON-based protocols such as SunSwap to source the necessary funds in TRX, TRON’s native cryptocurrency. As of press time, neither 1inch nor SunSwap made any public statements.
Meanwhile, U.S.-based blockchain analytics firm Chainalysis says there are “overstated metrics and flawed analyses” regarding the use of crypto among terrorist groups.
While some organizations such as Hamas, Hezbollah, and Palestinian Islamic Jihad utilize cryptocurrency for financial activities, the firm argued that it remains a small part of their overall funding strategy.