Kraken temporarily restricted some customer accounts after nearly 12,000 small crypto transfers arrived from a wallet identified by Arkham Intelligence as linked to HTX, turning unsolicited d
Kraken temporarily restricted some customer accounts after nearly 12,000 small crypto transfers arrived from a wallet identified by Arkham Intelligence as linked to HTX, turning unsolicited deposits worth as little as a few cents into sanctions-compliance alerts.
The transfers ran from August 17 through August 24, with most worth only cents or a few dollars. Kraken restored access to affected accounts after reviewing the activity while continuing to hold funds covered by sanctions restrictions.
Kraken described the activity as a “dust attack” designed to spread sanctioned funds across other platforms and trigger automated compliance controls. The exchange said it does not know who initiated the transfers.
Arkham Intelligence associated the sending wallet with HTX using addresses the exchange had previously disclosed through its proof-of-reserves process. That attribution remains disputed by HTX.
HTX denied initiating the transfers and is investigating whether the activity resulted from address misattribution or malicious third-party activity. The exchange had already denied intentionally distributing small transactions when HTX-linked USDT transfers began appearing across unrelated user wallets earlier in August.
Kraken’s use of “dust attack” differs from the classic form of crypto dusting, where tiny transactions are sent across addresses to help trace wallet ownership. Here, the unwanted transfers created compliance exposure because recipients cannot prevent another blockchain address from sending assets into their wallets.
The mechanism had already become a concern after sanctions screening tightened around HTX-linked transaction paths, with exchanges increasing scrutiny of deposits and withdrawals connected to flagged address clusters.
The eight-day burst crossed a significant regulatory deadline. European Union restrictions covering HTX under Huobi Global S.A. took effect August 23, one day before the transfer sequence ended.
The EU sanctions framework added HTX to a list of crypto and financial entities subject to transaction restrictions over activity connected to Russia.
The UK had already designated Huobi Global S.A. on May 26. Britain’s Office of Financial Sanctions Implementation later clarified that it considers the HTX exchange subject to those sanctions through its ownership relationship with the designated entity.
Kraken said its compliance team moved quickly once legitimate customers were caught by the screening process and is working with authorities to limit further disruption. The sanctioned portion of the incoming funds remains frozen.
Automated risk scoring around HTX has already generated criticism from onchain investigators. ZachXBT argued in June that widespread address tagging had made some onchain risk scores less useful because ordinary wallets can acquire exposure without knowingly interacting with a sanctioned entity.
Binance separately moved to restrict HTX transactions from August 23 in line with the EU measures, alongside restrictions covering EXMO and nine other crypto or payment platforms.
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