The global leader in the crypto trading sector, Binance, has allegedly transferred cryptocurrency worth almost $346 million for the Hong Kong-based Bitzlato, Reuters reported quoting data from Chainalysis. Bitzlato was a little known exchange until it was recently targeted in what U.S. authorities described as a “significant blow to the crypto crime ecosystem.”
Last week, the Justice Department announced that Bitzlato’s co-founder and majority shareholder, Russian citizen Anatoly Legkodymov who lives in China, was arrested in Miami and charged with operating an unlicensed money exchange business that processed $700 million in illicit funds.
On Wednesday, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) said that Binance was the only major crypto exchange that transacted with Bitzlato, and one of its top counterparties. Among the others were darknet marketplace Hydra, peer-to-peer (P2P) exchange Localbitcoins, and the crypto investment scam Finiko, Russia’s largest financial pyramid in recent years.
The Hong Kong-registered Bitzlato, better known to Russian-speaking users, was a “primary money laundering concern” related to Russian illicit finance, according to FinCEN. The bureau did not reveal details about the scale of said platforms’ transactions with Bitzlato but said it will ban financial institutions from transferring funds to the exchange without specifying the entities it was referring to.
According to data compiled by the blockchain forensics firm Chainalysis and seen by Reuters, Binance moved over 20,000 BTC for Bitzlato, worth $345.8 million at the time the transactions took place, between May 2018 and its shutdown. Bitcoin for about $175 million was transferred to Binance from Bitzlato during the period, making Binance its largest receiving counterparty, the report also noted.
Largest Crypto Exchange Says It Assisted Investigation Into Bitzlato
Binance has “provided substantial assistance” to international law enforcement to support their investigation of Bitzlato, a spokesperson for the exchange told the news agency via email, while declining to provide further details about the crypto giant’s dealings with Bitzlato or its cooperation with authorities.
The Finland-based Localbitcoins said it has never had “any kind of cooperation or relationship” with Bitzlato while admitting that some P2P traders at its platform “would also have been trading in Bitzlato’s P2P market” but pointing out that there have been no transactions between the two exchanges since October, 2022.
Reuters remarked it has no evidence that the Binance, Localbitcoins or Finiko transactions with Bitzlato broke any laws or regulations. It was also unable to establish if Binance’s dealings with Bitzlato are currently being reviewed. At the same time, the U.S.-led action against Bitzlato comes as the Justice Department probes Binance for possible money laundering and violations of sanctions.
A number of European countries are also involved in the investigation against Bitzlato. Last week’s announcement revealed that French law enforcement authorities have dismantled the platform’s digital infrastructure in the country and seized its website. On Monday, Europol informed that four more members of the exchange’s team have been arrested in Spain and Cyprus.
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