Kraken Blocks Accounts Amid HTX-Linked 'Dust Attack' Transfers

Kraken, a major cryptocurrency exchange, temporarily locked some customer accounts after detecting nearly 12,000 small crypto transfers from a wallet linked to HTX. The transfers, which took place between August 17 and August 24, were worth as little as a few cents.

The exchange described the activity as a 'dust attack,' where tiny transactions are sent across addresses to help track wallet ownership. However, in this case, the unwanted transfers created compliance exposure because recipients cannot prevent another blockchain address from sending assets into their wallets.

Kraken restored access to affected accounts after reviewing the activity while continuing to hold funds covered by sanctions restrictions. The exchange attributed the sending wallet to HTX using addresses it had previously disclosed through its proof-of-reserves process, but HTX denied initiating the transfers and is investigating whether the activity resulted from address misattribution or malicious third-party activity.

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, which considers HTX exchange subject to those sanctions through its ownership relationship with the designated entity.