For the first time, the Argentine courts blocked a crypto platform for refusing to provide information in a fraud case.

Through a request from the San Isidro cybercrime prosecutor's office, the Argentine courts have ordered the blocking of access to a cryptocurrency exchange nationwide for the first time, in retaliation for the company's refusal to provide information about the owner of a virtual wallet under investigation for a fraud case.

This is the HTX exchange, a Chinese exchange based in the Seychelles that operates globally and is a major player in the ecosystem. This is the first time a platform of this type has been blocked in Argentina, a measure that seeks to increase pressure on companies in the sector to cooperate with the justice system when disclosing data on individuals investigated for using crypto tools in criminal activities.

The measure was requested by prosecutor Alejandro Musso , who is conducting an investigation into a 2022 complaint. The victim, identified as MR, lost nearly $1.3 thousand due to a pig butchering scam, which occurs when the victim is told a dirty trick to get them to put up money.

Following the measure, approved by the Fourth Court of Guarantees, the exchange's website and app became inaccessible throughout Argentina. On social media, some users were already complaining about not being able to use the service. This doesn't affect the funds of those using HTX, but it does make it difficult for them to access the platform from within the country.

The case began with a complaint from MR, who in 2022 was scammed by a person with a phone number from the United Kingdom, who pretended to be interested in a tourism service to gain his trust. After several days of conversation, he invited him to invest through transfers in the cryptocurrency USDT (which has a 1:1 peg with the dollar) in a fraudulent "bonus mining" scheme that required him to contribute more money to withdraw what he was earning.

In total, the victim paid about $13,000 in USDT cryptocurrency before reporting the scam.

According to information gathered by the prosecution, it was possible to trace back to the victim's money ending up in a virtual wallet that was also being funded by a wallet within the HTX exchange, whose last four characters are c3fc.

Within this movement between wallets designed to hinder the investigation, one appeared linked to various gangs accused of pig butchering scams. Not only that, they had also participated in the RainbowEx scam, the Ponzi scheme that collapsed in San Pedro at the end of last year.

Using the centralized wallet information, the prosecutor's office filed a legal request with HTX for KYC (Know Your Customer) information, the identity verification process for new customers that every company must complete. It's a legal requirement for opening an account. However, despite several attempts, they received no response .

The prosecutor's office had already submitted another request for information related to a previous case, but was told that they could not provide the information due to legal restrictions and that it had to be done through agencies in the Seychelles, the state designated as a tax haven where the company is headquartered.

HTX is a Chinese company that started under the name Huobi in 2013. It was a cryptocurrency exchange at the time, but it began to grow rapidly. According to its website, it has over 47 million registered users globally. In recent years, it has also presented itself as a portal focused on Web3 solutions.

In Argentina, it has been operational since at least July 2021, according to the website. At that time, they announced in a public statement that they had enabled seven payment methods (including traditional banking and fintech) so that local users could buy and sell cryptocurrencies with pesos on the platform. That is, fund their accounts. Argentine identification documents are valid to create accounts on the platform.

But in March of last year, Law 27,739 was passed, which made changes to the Penal Code and amendments to the law regulating the Prevention of Money Laundering and Terrorism Financing.

Thus, virtual asset service providers (VASPs), that is, cryptocurrency exchanges, are now among those required to provide information. They are now required to register with the National Securities Commission (CNV). Currently, there are approximately 158 registered legal entities, although it is estimated that there are more than 800 exchanges globally.

HTX is one of those that is not registered in the country.

"From a criminal justice perspective, we understand that it is urgent to identify and block access to all platforms operating in the country without registration and judicial cooperation. This measure would not only strengthen the transparency of the crypto ecosystem, but would also provide legal certainty to both investors and victims of crimes related to crypto assets," Musso told Clarín .

They explained that the platform is offered in Argentina but has not been formally registered, which prompted the idea of ​​requesting a blockage until they cooperate with the justice system.

The resolution was addressed to ENACOM and went into effect last week. Clarín attempted to contact HTX representatives to inquire about the measure, but at press time, they had not responded to emailed questions. They also had not responded to court requests.

Within the sector, there are doubts about whether the measure could put any kind of pressure on other exchanges. "It can be blocked at the Web2 level: DNS, IPs, and so on. Is it the same way COMFER or AFSCA blocked sites at the time? The same way they tried to block The Pirate Bay globally? That's no good. It's nothing a VPN or residential proxy can't circumvent," explains a crypto industry expert.

"It does have an impact on the sector, and I guarantee that this precedent, far from scaring away users from that exchange, will attract them. You'll see an increase in transaction volume, whether in the number of transactions or the amounts handled in them," he theorizes.

The use of cryptocurrencies to divert funds from criminal activities is not limited solely to digital scams or other types of theft involving virtual assets. According to judicial sources, it is increasingly present in all types of theft. "An example is break-ins. They assault you inside your home, and when they take you hostage, they force you to open your virtual wallets to transfer money to mules, and from there to crypto. This is not a digitally native crime; it's a traditional crime that now moves money digitally," he summarizes.

But as the use of cryptocurrencies to move money increases, prosecutors report that requests for information from exchanges are taking longer or the requirements are becoming more complex. They even cite the example of the company with the largest market share in the country, which recently changed some internal regulations and blocked requests linked to foreign accounts.

As a result, there are requests for information that now take between six months and two years to resolve. For this reason, they are also considering asking the CNV to revoke the authorizations of companies registered with the PSAV but not cooperating.