Garden Finance Accused of Processing Over 80% Illicit Funds, Drawing Scrutiny from On-Chain Analyst ZachXBT

Executive Summary

Blockchain investigator ZachXBT has alleged that Garden Finance, a Bitcoin bridge, derived over 75% of its total trading volume from stolen funds between April and July, accumulating hundreds of thousands of dollars in fees. The claims assert that over 80% of the platform's recent fee revenue is linked to crypto laundering operations, specifically involving the Lazarus Group and funds stolen in the Bybit hack.

The Event in Detail

On-chain detective ZachXBT publicly accused Garden Finance, a platform self-described as "the fastest Bitcoin bridge," of facilitating the laundering of funds connected to major cryptocurrency thefts. In a June 21 post on X, ZachXBT stated that more than 80% of Garden Finance's recent fee income originated from illicit transactions. These transactions are allegedly tied to the North Korean Lazarus Group, which was involved in the Bybit hack that siphoned approximately $1.4 billion in Ethereum (ETH) on February 21, 2025.

ZachXBT's analysis indicated that Garden Finance accumulated 38.86 Bitcoin (BTC) in fees, equivalent to roughly $300,000, during a 12-day period ending June 2. The investigator further alleged that a single entity continuously replenished cbBTC (Coinbase-wrapped Bitcoin) liquidity from Coinbase, fueling illicit flows and directly contradicting Garden Finance's claims of operating a trustless and decentralized model.

Jaz Gulati, co-founder of Garden Finance, denied the allegations, categorizing them as misinformation. Gulati stated that a significant portion of the fees, approximately 30 BTC, was collected prior to the Bybit incident. He dismissed the "fake decentralized" label as baseless, maintaining the platform's operational integrity.

According to its Dune Analytics dashboard, Garden Finance has facilitated over 24,984 BTC in total volume, exceeding $1.5 billion, across 40,571 atomic swaps. The platform has collected 40.11 BTC in total fees to date.

Market Implications

The allegations against Garden Finance introduce significant implications for the broader Web3 ecosystem and investor sentiment towards decentralized finance protocols. The potential erosion of user trust due to the alleged involvement in illicit activities could lead to increased wariness concerning similar platforms. This event underscores the critical need for robust due diligence and enhanced security protocols within DeFi, particularly for bridges that facilitate large-volume transactions.

Furthermore, the controversy surrounding Garden Finance's decentralization claims highlights a growing concern within the DeFi space regarding the "decentralization illusion." When a single entity can significantly influence liquidity provisions, it challenges the core principles of decentralization, potentially exposing protocols to vulnerabilities reminiscent of centralized systems. This situation could prompt greater demands for transparency and stricter anti-money laundering (AML) measures across DeFi protocols, potentially impacting user adoption if trust is not re-established through verifiable means.

Expert Commentary

On-chain detective ZachXBT has consistently criticized blockchain technologies that generate revenue from illicit activities without implementing adequate accountability mechanisms or preventative measures. This stance reflects a broader concern within the crypto community regarding platforms that prioritize fee generation over adherence to ethical standards and regulatory compliance. The scrutiny from such investigators emphasizes the increasing transparency of on-chain data and the growing pressure on DeFi projects to operate with integrity.

Broader Context

This incident is situated within a broader context of ongoing challenges related to illicit financial flows within the cryptocurrency industry. The involvement of state-sponsored hacking groups like the Lazarus Group in large-scale crypto thefts, such as the Bybit hack, underscores the persistent threat of sophisticated cybercrime. The subsequent use of DeFi platforms for laundering these stolen funds highlights a critical vulnerability in the ecosystem.

The allegations against Garden Finance could contribute to calls for more stringent regulatory oversight and industry-wide adoption of advanced AML and Know Your Customer (KYC) solutions. Maintaining the credibility and long-term viability of the Web3 sector depends on effectively combating the misuse of decentralized technologies for illegal purposes, thereby fostering a more secure and trustworthy environment for legitimate users and investors.