- Binance allegedly sent more than $346 million in Bitcoin to Bitzlato during May 2018 to its closure last week.
- Bitzlato’s founder Anatoly Legkodymov was arrested on January 18 for processing over $700 million in illegal funds.
- Binance is the only major exchange linked as one of Bitzlato’s main trading counterparties.
Top cryptocurrency exchange Binance processed over $346 million in Bitcoin for Bitzlato, a Hong-Kong-based digital currency exchange that was seized last week due to alleged ties with dark net markets.
The founder of Bitzlato, Anatoly Legkodymov, was arrested by U.S. authorities on January 18 and has been charged by the U.S. Justice Department with operating an unlicensed money exchange business that allegedly processed $700 million in illegal funds.
The Justice Department stated that Bitzlato ran minimal background checks on its clients. Binance was one of Bitzlato’s major trading counterparties, receiving a significant amount of Bitcoin between May 2018 and September 2022.
According to FinCEN, Binance was the only major cryptocurrency exchange among the top trading partners of Bitzlato. FinCEN also reported that other entities that transacted with Bitzlato were the Russian-language darknet marketplace Hydra, a small exchange called LocalBitcoins, and a crypto investment website called Finiko, which it described as an alleged crypto Ponzi scheme based in Russia.
FinCEN considers Bitzlato a “primary money laundering concern” related to Russian illicit finance and will ban the transmission of funds to Bitzlato by U.S. and other financial institutions starting February 1.
A representative from Binance stated that the company has offered assistance to international law enforcement and is committed to collaborating in their investigation of Bitzlato. Although, they did not provide specific data about their dealings with Bitzlato.
According to Reuters, there is currently no proof that the transactions between Binance, LocalBitcoins, and Finiko with Bitzlato, which the Justice Department has labeled as a “criminal haven,” have violated any regulations or laws. However, former US government officials have stated that Binance’s prominent status as a main trading counterparty may draw scrutiny from the Justice Department and US Treasury for its compliance with Bitzlato.
A review of previously undisclosed data by leading U.S. blockchain research firm Chainalysis stated that Binance carried out 205,000 transactions worth over 20,000 bitcoin, equivalent to $345.8 million at the time of the transactions, for Bitzlato between May 2018 and the platform’s closure last week. The data also shows that Binance received approximately $175 million in Bitcoin from Bitzlato, making it the platform’s largest receiving counterparty during that period.