Key Points:
- Blockchain data shows that Binance transferred nearly $346 million in Bitcoin to the encryption exchange Bitzlato.
- Prior to the news on January 19, the US Department of Justice will take law enforcement action against the Russian trading platform Bitzlato, and the founder has been arrested.
- The Justice Department and the U.S. Treasury will pay close attention to Binance’s compliance checks with Bitzlato because it is one of the key counterparties.
Blockchain data suggests that Binance exchanged around $346 million in Bitcoin for the encryption exchange Bitzlato, according to Reuters.
On January 18, the Justice Department announced that it had charged Anatoly Legkodymov, a Russian citizen living in China and the majority shareholder of Bitzlato, with running an unlicensed money exchange business that fueled a high-tech axis of cryptocrime by processing $700 million in illegal funds.
According to the Justice Department, Bitzlato had bragged about how lightly it conducted customer background checks and that when the exchange did request users’ ID information, it frequently let them supply information belonging to straw man registrants.
LocalBitcoins, situated in Finland, said that it has never collaborated or interacted in any way with Bitzlato. There have essentially been no transactions between LocalBitcoins and BitZlato since October 2022, according to the statement. Some peer-to-peer (P2P) traders at LocalBitcoins would also have been trading in BitZlato’s P2P market, it said.
But according to a former American financial regulator and a former law enforcement official, the Justice Department and the U.S. Treasury will pay close attention to Binance’s compliance checks with Bitzlato because it is one of the key counterparties.
Ross Delston, an independent American lawyer and former banking regulator who is also an expert witness on anti-money laundering issues, referring to FinCEN’s citing of Binance and LocalBitcoins, said:
“I wouldn’t call it a warning shot over the bow, I would call it a guided missile.”
The founder of the Russian trading platform Bitzlato has been detained, and the US Department of Justice will pursue legal action against it.
A spokeswoman for Binance released the following comment in response to Bloomberg’s story that US FinCEN has named Binance as one of Bitzlato’s primary fund receivers.
“Binance 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.”
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