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Binance moved $346 mln for seized crypto exchange Bitzlato, data show


The Justice Department on January 18 said it had charged Bitzlato’s co-founder and major shareholder, Anatoly Legkodymov, a Russian citizen living in China, of operating an unlicensed money exchange business. driving a high-tech crypto crime axis” by dealing with $700 million in crypto. illegal funds.

Bitzlato advertised lax background checks on customers, the Justice Department said, adding that when the exchange asked users for ID information, “it repeatedly allowed them to provide information.” news belongs to “straw man” subscribers.

Binance, the world’s largest cryptocurrency exchange, is among the top three Bitzlato partners in terms of bitcoin received between May 2018 and September 2022, the Department’s Financial Crimes Enforcement Network US Finance (FinCEN) said last week.

FinCEN says Binance is the only major crypto exchange among Bitzlato’s top partners. It said other people dealing with Bitzlato were the Russian darknet drug market Hydra, a small exchange called LocalBitcoins, and a crypto investment site called Finiko, which FinCEN describes as “a scheme.” The alleged cryptocurrency Ponzi is based in Russia.” FinCEN did not detail the extent of the entities’ interactions with Bitzlato.

FinCEN added that Hong Kong-registered Bitzlato is a “major money laundering concern” related to illegal Russian financing. It will ban money transfers to Bitzlato by the United States and other financial institutions from February 1, FinCEN said. It did not name Binance or other individual companies among those banned.

A spokesperson for Binance said via email that it has “provided substantial assistance” to international law enforcement to assist with their investigation into Bitzlato. The company is committed to “working cooperatively” with law enforcement, they added, declining to provide details about its dealings with Bitzlato or the nature of its cooperation with such agencies. .

Bitzlato, whose website says it was confiscated by French authorities, Reuters could not be reached. Legkodymov, has not made any public comment since his arrest in Miami last week and has not responded to email requests for comment.

Finiko founder’s lawyer, Kirill Doronin, said FinCEN’s statement is “unfortunate for him, as he continues to expect the cryptocurrency to be returned to investors from those who stole it.” it.” Doronin did not use investors’ cryptocurrency while Finiko was active, said lawyer Dmitry Grigoriadi.

Hydra’s moderator, who was indicted in the United States last year, did not respond to requests for comment.

Finland-based LocalBitcoins said it has never had “any form of partnership or relationship” with Bitzlato. Some peer-to-peer (P2P) traders at LocalBitcoins “will also be trading on BitZlato’s P2P marketplace,” they said, adding that “there has been practically no transaction between LocalBitcoins and BitZlato since October 2022.”

Reuters found no evidence that Binance, LocalBitcoins or Finiko’s transactions with Bitzlato, which the Justice Department described as a ” haven for criminal funds and funds for criminal activity,” violated violate any rules or laws.

However, a former US banking regulator and a former law enforcement official said Binance’s status as one of the top partners will focus the attention of the Department of Justice and US Treasury on Binance’s compliance audit with Bitzlato.

“I wouldn’t call it a warning shot, I’d call it a guided missile,” said Ross Delston, an independent American attorney and former banker and expert witness in public affairs. Anti-Money Laundering, said. FinCEN quote on Binance and LocalBitcoins.

The Justice Department and FinCEN declined to comment.

Binance transferred more than 20,000 bitcoins, worth $345.8 million at the time they were traded, across approximately 205,000 transactions to Bitzlato between May 2018 and closing last week, according to a review of unaudited data. previously reported. The figures were compiled by leading US blockchain researcher Chainalysis and viewed by Reuters.

The data shows that approximately $175 million worth of bitcoins were transferred to Binance from Bitzlato during that time, making Binance its largest receiving partner.

About $90 million in total transfers took place after August 2021, when Binance said it would require users to submit identification to fight financial crime, according to data from Chainalysis, denying comment. Binance said in a blog last year that such checks would address “funding and money laundering from illegal activities.” Reuters was unable to determine whether Binance enforced its ID requirements with Bitzlato.

DARKNET MARKET

Chainalysis, which is used by US authorities to track illicit cryptocurrency flows, warned last February that Bitzlato poses a high risk. In a report, Chainalysis said nearly half of Bitzlato’s remittance transactions between 2019 and 2021 were “illegal and risky,” identifying nearly $1 billion in those transactions.

The US action against Bitzlato comes as the Department of Justice investigates Binance for possible money laundering and sanctions violations. Several federal prosecutors have concluded that the evidence gathered justifies the charges against executives, including founder and CEO Changpeng Zhao, Reuters reported in December.

Reuters was unable to determine whether Binance’s transactions with Bitzlato were under review.

Binance, which does not disclose the location of its core exchange, has processed at least $10 billion in payments to criminals and companies seeking to evade US sanctions, Reuters has found. seen in a series of articles last year based on blockchain data, court and company records.

The report also found that Binance intentionally maintained weak anti-money laundering controls and conspired to evade regulators in the United States and elsewhere, according to former executives and company documents. company.

Binance has protested against the articles, calling illegal fund calculations inaccurate and descriptions of its compliance controls “outdated”. The exchange said last year that it was “promoting higher industry standards” and that it was looking to improve its ability to detect illegal crypto activity.

Both Binance and Bitzlato are important partners of the world’s largest darknet drug market, Hydra. The Russian-language website was shut down by US and German authorities last year. The Justice Department said Bitzlato exchanged more than $700 million in cryptocurrencies with Hydra, either directly or through an intermediary.

In an article published last June, Reuters reviewed blockchain data showing that buyers and sellers on Hydra used Binance to make and receive approximately 780 worth of crypto payments. million dollars between 2017 and 2022. A spokesperson for Binance at the time said Hydra’s numbers were “inaccurate”. and overblown.”

This story has been published from the electronic agency’s feed without any modification to the text.

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