Make Kitco Your Homepage

Binance implicated in the Bitzlato case as the firm's top-receiving counterparty

Kitco News

Editor's Note: With so much market volatility, stay on top of daily news! Get caught up in minutes with our speedy summary of today's must-read news and expert opinions. Sign up here!

(Kitco News) - Binance, the world’s largest cryptocurrency exchange, has been identified as a major counterparty to the recently shuttered cryptocurrency trading platform Bitzlato, according to the U.S. Financial Crimes Enforcement Network (FinCEN).

FinCEN published an order on Thursday which indicates the top three receiving counterparties for Bitzlato – based on the total amount of Bitcoin (BTC) received between May 2018 and September 2022 – were Binance, Russia-connected darknet market Hydra, and the Russia-based alleged Ponzi scheme known as “TheFiniko.”

The top three sending counterparties during that same period were Hydra, the peer-to-peer Bitcoin exchange Local Bitcoins, and “TheFiniko.”

“Bitzlato’s receiving and sending transactional activity shows a significant connection to counterparties associated with other suspected illicit activities, such as darknet markets and scams with ties to and operations in Russia,” FinCEN noted in the order. “Approximately two-thirds of Bitzlato’s top receiving and sending counterparties are associated with darknet markets or scams.”

The agency said a blockchain analysis company determined that between 2019 and 2021, seven virtual asset service providers (VASPs) based in Moscow sent Bitzlato crypto worth $206 million from darknet markets, $224 million from scams, and $9 million from ransomware attackers. “The value of transactions involving Russian illicit finance or otherwise risky sources quantified as 48 percent of all known Bitzlato transactions,” FinCEN said.

The order from FinCEN focused most of its attention on the dealings between Bitzlato and Hydra, and only mentioned Binance once in the order.

Yesterday, the U.S. Department of Justice held a special press conference where they announced a major enforcement action against Bitzlato and its founder Anatoly Legkodymov, with the list of charges including money laundering and allegedly facilitating circumvention of sanctions against Russia.

Bitzlato was founded in 2016 and has remained under the radar of most cryptocurrency holders. The announced enforcement action came as a surprise to many, with the most common response being, “What’s Bitzlato?”

DoJ moves against the "criminal exchange" Bitzlato, arrests its founder Anatoly Legkodymov

The implication of Binance is sure to cause bigger waves within the crypto ecosystem which is still battling to recover from a pair of high-profile contagion events in 2022 that wiped out more than $2 trillion in value from the total crypto market cap. Binance previously caused a stir when it continued to serve non-sanctioned Russians after the European Union adopted its eighth sanctions package against the country.

In response to a request for comment, a spokesperson for Binance said the exchange is “pleased to have 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.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.