Crypto Project YieldNodes Sues Chainalysis Over False Scam Labelbr>
Hong Kong-based crypto project YieldNodes has sued blockchain surveillance firm Chainalysis over false claims that labeled the project as a scam.
In its 2023 Crypto Crime Report, Chainalysis depicted YieldNodes as the second-largest crypto scam in 2022, with $341.6 million in reported revenue. However, YieldNodes claims it only found out about this label after some of its participants began receiving transaction errors trying to deposit or withdraw profits.
YieldNodes operates a masternode pool that rents out computing power to participants. But the company says Chainalysis never attempted to contact them before publishing the damaging report. When YieldNodes reached out to discuss the claims, Chainalysis representatives only tried selling them software licenses rather than addressing the allegations.
The scam designation had major consequences for YieldNodes’ business. Exchanges began blocking participant transactions, and reputational damage spread as the media copied Chainalysis’ report. YieldNodes products were even removed from some trading platforms due to the firm’s report.
Now, YieldNodes is taking legal action, accusing Chainalysis of putting “marketing ahead of reliability”. The crypto project notes Chainalysis has admitted its flagship product lacks key information like false positive and negative rates that could demonstrate the system’s accuracy.
YieldNodes is also citing Chainalysis’ size and influence in challenging the claims in court. Founded in 2014, Chainalysis serves exchanges, financial institutions, and government agencies like the FBI, IRS, and SEC with its blockchain surveillance software. It has received over $3.3 million from In-Q-Tel, the venture capital arm of the CIA.