1 hour ago
238
The blockchain investigator ZachXBT called the UK’s recent sanctions against HTX (formerly Huobi) excessive, arguing that tainting on-chain addresses tied to the exchange is causing collateral damage to regular crypto users.
The UK regulators’ sanctions have turned the crypto wallets of users of major exchanges into a liability, leading to frozen funds and a scramble for companies to “clean” their crypto.
What is the address tainting that the FCA caused?
ZachXBT, a pseudonymous on-chain sleuth with a track record of exposing crypto fraud, posted on X that “recent UK crypto sanctions seem to be a bit of an overreach.” The complaint here is specifically about address tainting, which occurs when a major exchange is sanctioned and compliance software flags not just the exchange’s main wallets, but any wallet that has ever transacted with it.
Weeks ago, the UK government designated Huobi Global S.A., the Panama-registered entity behind HTX, in relation to a crackdown on Russia sanctions evasion. The UK alleged that the entity facilitated more than $1.5 billion in flows connected to the crime.
Following this, addresses linked to the exchange were tainted, leading to ordinary users who merely traded on HTX in the past finding their funds frozen or blocked at other financial services.
For instance, FixedFloat, a non-custodial exchange, announced that it had updated its compliance procedures and would suspend funds originating from Huobi.
ZachXBT noted that past sanctions on crypto entities like Blender or Hydra were focused on platforms with a “high % of illicit activity,” whereas HTX has a massive base of retail users in Asia.
“Basically now I’ve had to ignore the sanctions category when tracing cases by exposure since ‘risk’ itself has become meaningless,” he wrote. He added that UK authorities may have missed a separate $1.25 billion money laundering case while focusing on the HTX case.
One HTX user, posting under the handle @0xasrequired, shared that users whose wallets have been touched are scrambling to move their funds into clean wallets just to resume normal activity.
The FCA first filed a lawsuit against HTX back in October 2025 over illegal financial promotions targeting UK consumers. The regulator referred to the exchange in its press release as a company that “operates an opaque organisational structure, hiding the identities of its owners and the operators of its website.”
Justin Sun’s reputation complicates HTX’s problems
Huobi allegedly sent more than $4.9 billion to entities linked to Russian sanctions evasion between 2021 and 2026, and recently, World Liberty Financial (WLFI), the crypto project backed by President Trump, froze on-chain addresses associated with HTX, citing “sanctions compliance reviews.”
This was the second time WLFI activated its on-chain freeze feature; the first was against Justin Sun personally in 2025.
In retaliation, HTX delisted WLFI’s USD1 stablecoin on June 7 and converted all user holdings to Tether (USDT) at a 1:1 ratio. HTX accused WLFI of a “unilateral action” taken “without sufficient prior communication” and argued that the sanctioned entity (Huobi Global S.A.) is legally distinct from the HTX exchange platform.
The latest tit-for-tat action is the most recent in a case that has escalated into legal action between the Trump-linked project and Sun, who is as divisive a figure as any in the crypto space.
Cryptopolitan reported that TRON, whose founder Justin Sun has ties to HTX, is still processing around $1.1 billion in daily volume. The company moved over $21 billion in funds flagged as high-risk between May 2021 and May 2026.
The smartest crypto minds already read our newsletter. Want in? Join them.
English (US)