ZachXBT targets a lesser-known DEX for illegal crypto flows.
The forum, however, denied any wrongdoing. Tokenlon claims that it does not hold funds and all transactions are publicly available on-chain.
Blockchain investigator ZachXBT has built a reputation for repeatedly calling out crypto platforms and entities he believes are involved in suspicious or illegal activity.
With the recent lawsuit, he turned his attention to Tokenlon, a relatively unknown decentralized exchange with about 17,000 followers on X.
Tokenlon attracts scrutiny
ZachXBT has alleged that a large share of the business activity on the decentralized exchange Tokenlon may be linked to illegal sources. These include love scams, human trafficking, investment fraud and underground markets in China.
He mentioned the founder of Tokenlon, Ben Hee Bee, and suggested future steps towards Tokenlon and EmToken. In addition, the investigator also identified other platforms that he believed to be linked to illegal money flows, such as Butter Network, HiFiSwap, Bridgers/SWFT and Tokenlon, and called for them to be prioritized for enforcement attention.
A user allegedly scammed their friend's mother out of 270 ETH and the money was sent to Tokenlon. In response, ZachXBT says he's seen many similar cases from victims. He said that while the platform presents itself as decentralized, in practice it doesn't fully function as one.
In response, Tokenlon admitted that it was aware of illegal currencies' on-chain discussions and connections to decentralized protocols and asserted that it does not hold users' funds, adding that transactions are publicly available on the chain. “It never facilitates crime,” he said.
“We recognize that unlicensed infrastructure can be exploited. Combating this requires a “joined defense” between wallets, security organizations and law enforcement.”
Decentralized claims are questioned.
Interestingly, ZachXBT cited a 2022 report by Cryptoforensic Investigators, which questioned Tokenlon's decentralization claims. He explained that while platforms like Uniswap and 1inch operate on fully immutable smart contracts, Tokenlon behaves differently in practice. The report says Tokenlon is linked to the imToken wallet and imToken Pte Ltd, which allows users to exchange Bitcoin with an “imBTC DApp”.
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According to the analysis, this setup resembles a centralized OTC service rather than a true decentralized exchange. He described the process by which BTC is sent to Tokenlon's controlled wallet, registered off-chain in their system, and converted to imBTC before being later converted to USDT. The report further states that IMBTC works like a centralized asset pegged to Bitcoin and that Tokenlon maintains the protection of the underlying BTC, similar to how stablecoin issuers manage reserves.
Additionally, a 53-page working paper titled “How Is Crypto-Financial Slavery? The Economics of Pork-Eating,” originally posted on March 28, 2024, also found that 57-60% of Tokenlon exchanges in 2022-23 involved addresses linked to scam networks. Victims' funds in ETH or USDC often pass through Tokenlon and are later converted to USDT or DAI before reaching centralized deposit accounts.
