Kraken said some customers were briefly locked out after their deposit addresses received small amounts of crypto tied to sanctioned funds in a burst of activity between Aug. 17 and Aug. 24.

The exchange said the transfers appeared to be a dust attack designed to spread sanctioned assets across other platforms and trigger automated account restrictions. Kraken restored access for affected users, froze the funds and said it is coordinating with authorities while it investigates what happened.

Microtransactions triggered compliance checks

According to Kraken, the incoming transactions ranged from a few cents to a few dollars each. The company said they appeared intended to land in customer deposit addresses so that sanctions screening systems would flag those accounts when the assets arrived.

Some Kraken customers were briefly locked out on the first day the activity was detected. Kraken said its compliance team later restored access while continuing to hold the sanctioned funds.

A low-cost way to weaponize sanctions screening

The tactic is commonly known as a dust attack. In this case, Kraken said the attacker appeared to use the transparency of public blockchains to connect sanctioned funds to unrelated users at minimal cost.

By sending tiny amounts of crypto to many addresses, an attacker can attempt to turn standard compliance controls into a disruptive tool. Kraken said it is investigating the incident and working with authorities to reduce the risk of similar cases in the future.

HTX says official accounts were not involved

HTX, where Justin Sun is an adviser, said an internal review found that no official accounts were responsible for the microtransactions. The company said it is examining whether the sending wallet was incorrectly identified or whether a third party was involved.

The timing added scrutiny. The European Union added HTX to a transaction ban in July as part of a broader crackdown, and that ban took effect on Aug. 23, while the transfers to Kraken users were still taking place.

Not the first case of sanctioned funds sent to others

The episode follows an earlier example of sanctioned crypto being sent to uninvolved parties. In 2022, an unidentified sender transferred ether from Tornado Cash, a sanctioned mixer, to celebrity wallets.

U.S. authorities later said enforcement would not prioritize delayed reports from recipients in that situation. Kraken did not immediately provide additional comment beyond its public statement, and the exchange said the sanctioned funds remain frozen as the investigation continues.

Source: www.coindesk.com