Blockchain investigator ZachXBT has built a reputation for calling out crypto platforms and entities he believes are involved in suspicious or illegal activity.
In his most recent allegation, he focused on Tokenlon, a relatively small decentralized exchange with approximately 17,000 followers on X.
Tokenlon Draws Scrutiny
ZachXBT has alleged that a substantial portion of trading activity on Tokenlon may be tied to illicit sources, including romance scams, human trafficking, investment fraud, and underground markets in China. He specifically named Tokenlon’s co-founder, Ben He Bin, and indicated that Tokenlon and the imToken wallet could face future enforcement attention. The investigator also identified other platforms he believes are involved in illegal fund flows—such as Butter Network, HiFiSwap, Bridgers/SWFT, and Tokenlon—and said these should be prioritized by regulators and law enforcement.
One user reported that a friend’s mother had been scammed out of 270 ETH and that the funds were sent to Tokenlon. ZachXBT replied that he has seen many similar victim cases. Although Tokenlon presents itself as decentralized, he argued it does not fully operate like a decentralized exchange in practice.
Tokenlon responded on X, acknowledging discussions about illicit funds interacting with decentralized protocols and reiterating that it does not custody user funds. The platform emphasized that on-chain transactions are publicly traceable and stated, “We absolutely do not facilitate crime.”
“We recognize that permissionless infrastructure can be exploited. Combating this requires a ‘unified defense’ across wallets, security firms, and law enforcement.”
Decentralization Claims Questioned
ZachXBT cited a 2022 report by Cryptoforensic Investigators that questioned Tokenlon’s decentralization claims. The report contrasted Tokenlon with fully on-chain automated market makers like Uniswap and 1inch, asserting that Tokenlon operates differently. The analysis linked Tokenlon to the imToken wallet and imToken PTE Ltd., and noted that Tokenlon enables users to swap Bitcoin via its “imBTC DApp.”
The report argued this model resembles a centralized over-the-counter (OTC) service rather than a truly decentralized exchange. It described a process in which BTC is reportedly sent to wallets controlled by Tokenlon, recorded off-chain in their system, and then converted into imBTC before swaps to USDT take place. According to the report, imBTC behaves like a centralized asset pegged to Bitcoin with Tokenlon retaining custody of the underlying BTC—similar to how issuers of certain stablecoins hold reserves.
Further research has raised similar concerns. A 53-page working paper, “How Do Crypto Flows Finance Slavery? The Economics of Pig Butchering,” published in March 2024, found that roughly 57–60% of Tokenlon swaps during 2022–2023 involved addresses linked to scam networks. That paper reported that victim funds denominated in ETH or USDC often pass through Tokenlon and are later converted into USDT or DAI before moving on to centralized deposit accounts.
These allegations place Tokenlon under renewed scrutiny from investigators and potentially regulators, who face the challenge of distinguishing permissionless infrastructure’s legitimate uses from its exploitation by bad actors. Tokenlon maintains that it does not custody users’ funds and that transactions remain traceable on-chain, while critics point to off-chain processes and custody-like mechanisms as evidence that certain decentralized platforms can operate in centralized ways.