Blockchain data reveals that bitcoin worth $346 million was processed by crypto exchange Binance for the digital currency exchange Bitzlato.
The founder of the said exchange was arrested in the previous week by US authorities for allegedly engaging in money laundering activities.
The charges
On January 18th, the Department of Justice (DOJ) charged the majority shareholder and co-founder of Bitzlato, Russian national Anatoly Legkodymov, who was living in China.
The charges against him were for running an unlicensed money exchange business, which had processed illicit funds worth $700 million, thereby fueling a substantial number of crypto crimes.
The Justice Department said that the crypto exchange had touted its lax requirements in terms of clients’ background checks.
It also said that when the exchange did ask for ID information from its users, it would repeatedly give them room to provide data that belonged to ‘straw man’ registers.
One of the top three counterparties that received bitcoin from Bitzlato included Binance, the largest crypto exchange in the world in terms of the trading volume.
Last week, FinCEN, the Financial Crimes Enforcement Network of the US Treasury, said that Binance had received bitcoin between May 2018 and September 2022.
The platforms
According to FinCEN, the only prominent crypto exchange in the top counterparties of Bitzlato was Binance.
It revealed that the other platforms that had conducted transactions with Bitzlato had included Hydra, the darknet drug marketplace of Russia.
LocalBitcoins, a small crypto exchange was also included, as was Finiko, a crypto investment website, which was also described as a Russian-based Ponzi scheme.
However, it should be noted that FinCEN did not provide details about the scale of the interactions that the entities had with Bitzlato.
FinCEN said that Bitzlato, which is registered in Hong Kong, had become a major concern for money laundering reasons involving illicit finance in Russia.
From February 1st, the transmission of funds from financial institutions in the US and others to Bitzlato would be banned.
But, it did not list companies like Binance, or others, which might be subject to the ban.
Other details
A spokesperson for Binance stated that they had assisted international law enforcement in their Bitzlato investigation.
They said that the company was committed to cooperating with law enforcement, but did not provide any details about its own Bitzlato dealings.
According to Bitzlato’s website, French authorities have seized the exchange. Kirill Doronin the founder of Finiko and an attorney for him said that the statement of the FinCEN was rather unfortunate.
He said that they were hoping that the stolen crypto could be returned to investors and that no customer funds had been used by the company.
LocalBitcoins, which is based in Finland, stated that it did not have any relationship with Bitzlato. It did add that some P2P traders on its platform could have traded on Bitzlato’s P2P market.
But, it said that no transactions had occurred between the two platforms since October 2022. It is Binance’s involvement that has drawn attention because the exchange has been under scrutiny of late.
