Binance reportedly moved USD 346 mln for seized crypto exchange Bitzlato

The US Justice Department has accused Bitzlato’s co-founder and majority shareholder, Anatoly Legkodymov, a Russian national living in China, of operating an unlicensed money exchange business.

Cryptocurrency exchange Binance has reportedly processed a significant amount of money, around USD 346 mln in bitcoin, for the Bitzlato digital currency exchange.

The Department claims that Bitzlato “fueled a high-tech axis of cryptocrime” by processing USD 700 mln in illicit funds. The Justice Department also stated that the business had touted the laxity of its background checks on clients and, when it did ask users for ID information, “it repeatedly allowed them to provide information belonging to 'straw man' registrants.”

The US Treasury's Financial Crimes Enforcement Network (FinCEN) reported that Binance was among Bitzlato's top three counterparties by the amount of bitcoin received between May 2018 and September 2022.

The reporting also showed that Binance intentionally kept weak anti-money laundering controls and plotted to evade regulators in the United States and elsewhere.

FinCEN noted that Binance was the only major crypto exchange among Bitzlato's top counterparties. The other entities that transacted with Bitzlato were a Russian-language darknet drugs marketplace called Hydra, a small exchange called LocalBitcoins, and a crypto investment website called Finiko, which FinCEN described as “an alleged crypto Ponzi scheme based in Russia.”

However, FinCEN did not provide any details about the scale of these entities' interactions with Bitzlato.

FinCEN has classified Hong Kong-registered Bitzlato as a “primary money laundering concern” related to Russian illicit finance. As a result, FinCEN will ban the transmission of funds to Bitzlato by US and other financial institutions from February 1. FinCEN did not name any individual firms among those subject to the ban.

A Binance spokesperson stated that the company had “provided substantial assistance” to international law enforcement to support their investigation of Bitzlato.

The spokesperson added that the company is committed to “working collaboratively” with law enforcement, but did not provide any details about its dealings with Bitzlato or the nature of its cooperation with such agencies.