Binance Identified as Counterparty to Anatoly Legkodymov’s Bitzlato Alleged Money Laundering Scheme
Binance, the world’s largest crypto exchange by trading volume, has been identified as a counterparty to the little-known exchange Bitzlato, which is now facing money laundering charges in the US.
The controversy surrounding Bitzlato now also involves Binance, after the US Department of the Treasury wrote in an order that Binance was Bitzlato’s top receiving counterparty of bitcoin (BTC) between May 2018 and September 2022.
Coming in as the second and third receiving counterparties were Russian dark web market Hydra and TheFiniko, a Russia-based website that has been accused of operating a pyramid scheme.
The top sending counterparties were identified as Hydra, peer-to-peer trading platform LocalBitcoins, and TheFiniko.
The order claimed that about two-thirds of Bitzlato’s “top receiving and sending counterparties are associated with darknet markets or scams.” It also said that the exchange, which is registered in Hong Kong, has “significant ties to and connections with Russia,” and that it was used for money laundering by “Russian illicit finance.”
Binance assisted investigation
Commenting on the news that Binance was a top receiver of funds from Bitzlato, a Binance spokesperson told Bloomberg that the exchange fully cooperated with law enforcement in the case.
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,” the spokesperson said.
Bitzlato’s founder, Russian national Anatoly Legkodymov, was arrested in Miami on Tuesday this week on charges related to money laundering from illegal gambling and drug deals. It is said that approximately $700m of illegal proceeds were laundered through Bitzlato.
News ridiculed in crypto community
The announcement by the US Government that it is pursuing charges against Bitzlato has largely been met with ridicule in the crypto community, where few people have even heard about the exchange before.
“LOL I spend 8+ hours a day following this lovely industry and I’ve literally never heard of Bitzlato,” the popular Bitcoin proponent Dylan LeClair wrote on Twitter as the news broke on Wednesday.
LOL— Dylan LeClair 🟠 (@DylanLeClair_) January 18, 2023
I spend 8+ hours hours a day following this lovely industry and I've literally never heard of Bitzlato. https://t.co/tKaUR2NYV0
Others agreed, with for instance the popular crypto investor Mike Alfred calling the news “pretty lame.”
It's pretty lame tbh— Mike Alfred (@mikealfred) January 18, 2023
Stuart Alderoty, a general counsel for Ripple, also admitted on Twitter that he had never hears about Bitzlato before, but said the Department of Justice through the recent makes it clear that it will prosecute crypto-related crimes.
“That’s good policy,” he said.
I also heard about Bitzlato for the first time today, but (despite the funny memes) the DOJ's action makes clear that they will prosecute those who exploit the crypto ecosystem to commit crypto crimes. That's good policy.— Stuart Alderoty (@s_alderoty) January 18, 2023