Bitzlato accused of laundering $700 million, Binance named as counterparty

Bitzlato founder, Anatoly Legkodymov, has been arrested and charged with laundering illicit funds— about $700 million. This apprehension comes as a crucial attempt by the US Justice Department to chide a “money laundering engine which contributed to a high-tech axis of crypto crime.”

Binance was named as the top three receiving and sending counterparties associated with Bitzlato, according to the order from the Treasury’s Financial Crimes Enforcement Network (FinCEN).

Bitzlato founder Anatoly Legkodymov— was arrested on Tuesday night in Miami for an illegal operation of a money-transmitting business that did not pass through the anti-money laundering requirements and processed illegal funds.

Anatoly Legkodymov is a 40-year-old Russian national who resides in China. He would be arraigned in the U.S. District Court for the Southern District of Florida. 

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Deputy Attorney General Lisa Monaco stated, “Overnight, the department worked with key partners here and abroad to disrupt Bitzlato, the china-based money laundering engine that fueled a high-tech axis of crypto crime.”

He added, “Whether you break our laws from China or Europe— or abuse our financial system from a tropical island— you can expect to answer for your crimes inside a United States courtroom.”

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More details about Bitzlato founder arrest

There is information that Bitzlato was partnered with Hydra Market, an unknown virtual marketplace for narcotics, stolen financial information, fraudulent identification documents, and money laundering services.

“Approximately two-thirds of Bitzlato’s top receiving and sending counterparties are associated with darknet markets or scams.

“For example, Bitzlato’s top three receiving counterparties, by the total amount of BTC received between May 2018 and September 2022, were: (1) Binance, a VASP; (2) the Russia-connected darknet market Hydra; and (3) the alleged Russia-based Ponzi scheme “TheFiniko,” the order said.

“Binance is pleased to have provided substantial assistance to international law enforcement partners in support of this investigation. This exemplifies Binance’s commitment to working collaboratively with law enforcement partners worldwide,” a Binance spokesperson told Coindesk.

The U.S. Department of Justice explained that Hydra users exchanged over $700 million in crypto with Bitzlato until the marketplace was brought down in 2022. According to the press release, the Department of the Treasury’s Financial Crimes Enforcement Network and French authorities are taking simultaneous enforcement routines in the Bitzlato case. 

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The company has been officially listed as a “primary money-laundering concern” by the Treasury’s Financial Crimes Enforcement Network (FinCEN), one of the most severe sanctions in the government’s arsenal for combating crime because it typically cuts off a company from the international financial system.

The label effectively classifies the exchange as “a worldwide pariah,” according to Wally Adeyemo, deputy secretary of the Treasury. Justice Department authorities claim that the anonymous cryptocurrency exchange handled $700 million in direct and indirect transfers over several years while housing criminals’ wallets used to purchase and sell unlawful products.

According to FinCEN, the business ran significant amounts of illegal transactions for Russian ransomware perpetrators, including those with ties to the Russian government.

The business, whose servers have been taken over, was also connected to regular transactions with the Russian-based Hydra Market. This darknet market was the object of an investigation by American officials last year. According to Monaco, the “Hydra-Bitzlato crypto-crime axis” has been dismantled.

What does this mean for the crypto market?

The market has witnessed the rise and fall of different fraudulent schemes. The FTX and Sam Bankman Fried debacle is the most popular, gearing many into a splurge of losses.

The admissible impact of FTX’s crash down pelted the hopes of a better market. Regulations are in place, and stakeholders are on a tireless and ceaseless drill to ensure a repetition of these fraudulent schemes does not find a habitable spot in the cryptocurrency sector anymore. 

Bitzlato is one of these fraudulent businesses that could have dealt the market a severe blow in the jaw if its activities had not been adequately monitored and scouted by the United States Department of Justice.

In the coming days, crypto traders should keep a calm mind as regulations seek to protect them, and institutions are concurrently looking out for crypto firms with fraudulent activities.