Ethereum Classic Labs looking to sue NiceHash

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Ethereum Classic Labs is planning to work with law enforcement officials and global regulators to get hash rental services to comply with the Know Your Customer and Anti-Money Laundering laws.

In its latest blog post, ETC Labs blames NiceHash for the 51% attacks taking place on the Ethereum network. It claimed:

“Many exchanges and other digital asset service providers have implemented robust KYC and anti-money laundering programs, however, hash rental platforms such as NiceHash often purport to be unregulated, potentially facilitating money laundering and other illegal activities.

“With little or no KYC, AML, or crypto address screening, customers have the ability to rent hash rate to potentially launder cryptocurrency for freshly minted tokens with no history. Considering how important hash rate is to the security of Proof-of-Work blockchains, this is a serious vulnerability for the blockchain ecosystem as a whole.”

The majority of the post blames NiceHash for the three 51% attacks that Ethereum Classic has experienced in the past month. The post also claims that NiceHash is operating in a grey area and that the company’s founder is no stranger to crime.

NiceHash co-founder’s criminal record

NiceHash co-founder and CTO Matjaz Skorjanc was arrested in 2011 in connection with the Mariposa botnet, which reportedly infected roughly 1 million computers and resulted in roughly $4 million in damages. Aside from creating Mariposa, Skorjanc was also linked to the creation of cybercrime forum Darkode.

In 2015, Skorjanc was charged for these crimes, and served 4 years and 10 months in a Slovenian jail. However, in 2019, Skorjanc was arrested in Germany because the U.S. Department of Justice had issued a warrant for his arrest. The U.S. government is looking to prosecute Skorjanc for his involvement “in several computer frauds between 2008 and 2013” and for being “a member of a criminal group in which the victims were damaged by several million euro,” and are hoping that Skorjanc will be extradited to the U.S. to face charges.

NiceHash, as a company, has not been proven guilty of any illicit conduct; although ETC Labs makes fair points regarding there being no KYC or AML on NiceHash, and therefore, it being easy to facilitate crime via NiceHash, it remains unclear whether the laws that apply to money service businesses apply to a company that deals in distributed computing power.

Regardless, it looks like ETC Labs will be pressing charges against Nicehash, ETC Labs says that, “ETC Labs and its partners will take all steps necessary to secure the Ethereum Classic network, including legal action against those who conduct or facilitate malicious attacks. ETC Labs is currently working with authorities in relevant jurisdictions and will share more information as well as progress updates shortly.”