Crypto giant Binance reportedly processed almost $346 million in Bitcoin BTC/USD for the Bitzlato digital currency exchange, thefounder of whichwas arrested by U.S. authorities last week for allegedly running a "money laundering engine," according to blockchain data, Reuters reported.
What Happened: The Department of Justice announced on Jan. 18it had charged Bitzlatos co-founder and majority shareholder, Anatoly Legkodymov, a Russian national living in China, with operating an unlicensed money exchange business.
The department stated the exchange "fueled a high-tech axis of crypto crime" by processing $700 million in illicit funds.
Bitzlato had been accused of flaunting the laxity of its background checks on clients, with the Department of Justiceadding that when the exchange did ask users for ID information, "it repeatedly allowed them to provide information belonging to 'straw man' registrants."
Binance, the world's largest crypto exchange, was among Bitzlato's top three counterparties by the amount of Bitcoin received between May 2018 and September 2022, according to the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN).
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FinCEN also noted Binance was the only major crypto exchange among Bitzlato's top counterparties, with the others being the Russian-language darknet drugs marketplace Hydra, a small exchange called LocalBitcoins, and a crypto investment website called Finiko, which FinCEN described as "an alleged crypto Ponzi scheme based in Russia."
FinCEN did not detail the scale of these entities' interactions with Bitzlato.
Furthermore, Hong Kong-registered Bitzlato was labeled as a "primary money laundering concern" related to Russian illicit finance by FinCEN.
Why It Matters: As a result, FinCEN will be banning the transmission of funds to Bitzlato by U.S. and other financial institutions starting Feb. 1. FinCEN did not name Binance or any other individual firms among those subject to the ban.
A Binance spokesperson told Reuters via email the company had "provided substantial assistance" to international law enforcement to support their investigation of Bitzlato.
The spokesperson added Binance was committed to "working collaboratively" with law enforcement, however, the company declined to give details about its dealings with Bitzlato or the nature of its cooperation with such agencies.
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