Kraken Says Dust Attack From HTX-Linked Wallets Briefly Locked Some User Accounts

Some customer accounts at cryptocurrency exchange Kraken were briefly locked after wallets linked to sanctioned exchange HTX sent a wave of tiny crypto transfers.

Bloomberg reported on August 25 that wallets identified as linked to HTX sent about 12,000 small transfers to Kraken-related addresses from August 17 through August 24. Most were valued at a few cents to several dollars.

Kraken described the activity as a dust attack. The tactic involves sending tiny amounts of crypto to another wallet to contaminate transaction histories or disrupt tracking and compliance systems. In this case, the apparent aim was to trigger the exchange's anti-money-laundering controls by placing sanctioned funds into customer accounts, Kraken said.

"The recent dust attack originating from HTX-owned wallets appears to be an attempt to spread funds sanctioned by the U.K. and the European Union across other platforms and undermine trust across the industry," a Kraken spokesperson said. The attackers may have expected that if sanctioned funds entered customer accounts, those accounts would be locked in their entirety, the spokesperson added.

Kraken said it has restored account access for affected users while continuing to freeze sanctioned funds in line with regulations. The exchange is now working with relevant authorities to limit further harm.

HTX denied carrying out the transfers directly. A spokesperson said the company is investigating the activity and that the source of the transfers may have been misidentified or may reflect malicious actions by a third party.

Blockchain analytics firm Arkham Intelligence classifies the wallet as HTX-linked based on an address HTX disclosed during its proof-of-reserves process.

Andy Zhou, chief executive officer of BlockSec, said the incident was akin to poisoning a user's transaction history. Because anyone can send assets on a blockchain without permission, attackers can deliberately manipulate transaction flows at very low cost, he added.

The U.K. sanctioned HTX operator Huobi Global SA in May, saying it was part of infrastructure that helped Russia evade sanctions. The EU announced related sanctions in July. Since then, major exchanges including Bybit, OKX and Binance have restricted or reviewed HTX-related transactions.