Garden Finance Accused of Laundering 80% of Fees from Bybit Hack

Blockchain investigator ZachXBT has accused Garden Finance, a Bitcoin-native DeFi protocol, of laundering cryptocurrency. The allegations, revealed on June 21, are linked to the Bybit hack orchestrated by the Lazarus Group. ZachXBT claims that over 80% of Garden Finance's fee revenue, approximately 38.86 BTC, was derived from laundered funds. This accusation raises questions about the protocol's decentralization and transparency, as well as the broader implications for the DeFi sector.

Garden Finance's co-founder, Jaz Gulati, has defended the protocol, stating that a significant portion of the fees were earned before the Bybit hack. However, ZachXBT's analysis suggests that a single entity manipulated cbBTC liquidity through Coinbase, contradicting Garden Finance's claims of decentralization. This manipulation raises concerns about the robustness of the system and the potential for bad actors to exploit it.

The broader implications of these accusations are significant for the DeFi sector. Concerns over the industry's ability to detect illicit activities effectively have intensified, signaling a need for more stringent regulatory measures. If proven accurate, ZachXBT's allegations could trigger regulatory scrutiny across Bitcoin DeFi bridges, leading to policy reassessment and heightened industry safeguards against money laundering activities over decentralized networks.

The controversy surrounding Garden Finance highlights the challenges faced by DeFi platforms in ensuring financial integrity. The allegations against Garden Finance come at a time when regulators globally are paying closer attention to the role of DeFi in cross-border money laundering. Platforms that present themselves as decentralized could face greater scrutiny if they are seen as conduits for illicit finance.

The Lazarus Group, believed to be linked to North Korea’s state apparatus, has long been associated with cybercrime campaigns aimed at funding sanctioned activities. Their use of crypto mixers, bridges, and DeFi protocols has placed these platforms under the microscope of both law enforcement and financial watchdogs. If proven, the allegations against Garden Finance could fuel calls for tighter regulations on DeFi infrastructure, including requirements for greater transparency, liquidity provider disclosures, and enhanced anti-money-laundering (AML) controls—even in so-called trustless systems.

For now, Garden Finance maintains its position, denying any wrongdoing and highlighting its prior earnings as evidence of compliance. However, the platform’s future could depend on its ability to demonstrate that it has not knowingly facilitated illegal activity and that its model can withstand independent audits and regulatory reviews. Meanwhile, ZachXBT’s investigation continues to reverberate throughout the crypto community, drawing both praise for shining a light on potential misconduct and criticism from those who argue that decentralized systems should not be judged by the behavior of individual participants.

What is clear is that the Garden Finance controversy underscores a critical juncture for blockchain bridges: as these tools become integral to the future of multi-chain finance, their designs must strike a delicate balance between speed, efficiency, decentralization, and legal compliance. The coming weeks may bring further revelations as independent analysts and regulators take a closer look at Garden’s operations and the broader risks posed by unchecked cross-chain transfers in the crypto ecosystem.