Cryptocurrency giant Binance has processed nearly $346 million (approximately Rs 2,900 crore) in Bitcoin for digital currency exchange Bitzlato, the founder of which was arrested by US authorities last week for being arrested. allegedly operating a “money laundering engine”, blockchain data showed by Reuters.
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 handling approximately $700 million (R. 5,800 crore) in illicit 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.
exchangesthe world’s largest cryptocurrency exchange, among the top three partners of Bitzlato by bitcoins received between May 2018 and September 2022, the Ministry of Finance’s Financial Crimes Enforcement Network US government (FinCEN) said last week.
Binance is the only major exchange electronic money exchange between Bitzlato’s leading partners, said FinCEN. It said other people dealing with Bitzlato were Russian darknet drug market Hydra, a small exchange called LocalBitcoins, and a cryptocurrency investment site called Finiko, described as “a Ponzi scheme.” the alleged cryptocurrency 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.
Hydra moderators, who have been indicted in the United States, and an attorney representing founder Finiko did not respond to requests for comment. So is Finland-based LocalBitcoins.
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 has moved over 20,000 Bitcoin, were worth about $345.8 million (Rs 2,900 crore) at the time they were traded, across about 205,000 transactions for Bitzlato between May 2018 and closing last week, according to a review of unpublished 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 (Rs. 1,400 crore) were transferred to Binance from Bitzlato during that time, making Binance its largest receiving partner.
About $90 million (Rs. 750 crore) of total transfers occurred after August 2021, when Binance said it would require users to submit identification to fight financial crime, according to data from Chainalysis, declined to 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 (Rs 8,200 crore) in transactions. such translation.
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 did not disclose the location of its core exchange, has processed at least $10 billion (approximately Rs 82,000) in payments to criminals and companies seeking to evade sanctions. United States, Reuters found 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 that Bitzlato exchanged more than $700 million (approximately Rs 5,700 crore) in crypto 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 crypto payments worth approx. $780 million (approximately Rs 6,400 crore) between 2017 and 2022. A spokesperson for Binance said at the time that Hydra’s drawing was “inaccurate and overblown.”
© Thomson Reuters 2023
