The new year looks to be off to a turbulent start for Chainalysis. In addition to Roman Sterlinggov's trial scheduled to begin on February 12, which calls into question the reliability of the Chainasis Reactor in multi-million dollar money laundering allegations, Chainasis is now being sued by the cryptocurrency project YieldNodes.
In its 2023 Cryptocurrency Crime Report, Chainalysis claimed that YieldNodes, a Hong Kong-based project that rents computing power to participate in a masternode pool, is a scam. In its summary graph of cryptocurrency scam activity, Chaina Analysis depicted YieldNodes as the second-largest cryptocurrency scam by revenue for 2022 with a total of $341.6 million. Notably, Chainalogy's chart failed to detect FTX, one of the largest cryptocurrency scams to date that embezzled $8 billion of customer funds.
“They never attempted to contact us before publishing their report, and when we tried to contact them to discuss their report, all they did was direct us to their sales representatives and attempt to sell us licenses for their software,” YieldNodes wrote in their newsletter .
The Chainalysis designation had severe consequences for YieldNodes' business, as participants were banned from depositing and withdrawing profits from exchanges. The reputational damage continued as Chainalysis' claim spread through the media, leading to the removal of YieldNodes' products from trading platforms.
In a short statement, YieldNodes told me that they only discovered the Chainasis rating after receiving transaction errors from participants. YieldNodes is now accusing Chainalogy of putting “marketing before reliability,” citing the admitted lack of scientific evidence for its flagship product, citing the lack of false positive rates, false negative rates, and margin of error rates.
In July, YieldNodes encouraged projects to join a potential class action lawsuit against Chainalysis, citing the size of the company and the costs associated with challenging Chainalysis' claims in court. Chainalysis, founded in 2014, is a blockchain surveillance company that offers its products to exchanges, financial institutions, and law enforcement agencies, including ICE, IRS, FBI, SEC, and DEA. Chainalysis has received more than $3.3 million from InQTel, the CIA's nonprofit venture capital arm, since 2020.