The US Treasury’s Financial Crimes Enforcement Network (FinCEN) has named the world’s largest crypto exchange, Binance, as a counterparty in its new order against Bitzlato. FinCEN alleged that Bitzlato laundered $700 million through various trading platforms, including Binance.
Caught In A Web
According to FinCEN’s latest order accusing the lesser-known crypto exchange, Bitzlato, of money laundering, Binance, along with two others, is involved in receiving and transfer of funds as counterparties.
The order from the regulator shows that two-thirds of Bitzlato’s transactions with counterparties are associated with fraudulent activities. In addition, the top three counterparties associated with Bitzlato have received millions of dollars worth of BTC between May 2018 and September 2022.
Furthermore, the order disclosed that Binance, as a virtual asset service provider (VASP), and others like the Russian-backed darknet market Hydra and TheFiniko, the Russian-based Ponzi scheme are the three counterparties.
Commenting on the recent development, a Binance spokesperson noted that the exchange is pleased to collaborate with international law enforcement agencies to support the ongoing investigation. The spokesperson added that this shows Binance’s commitment to cooperating with regulators worldwide to ensure the digital asset space is free of questionable activities.
However, TheFiniko is yet to say anything regarding the latest order from FinCEN. Their silence might mean they acted as counterparties, as stated in the allegation.
Meanwhile, FinCEN has branded Bitzlato as a money laundering red flag, and this label may cut off the small crypto exchange from participating in the international financial system.
Sources familiar with the development revealed that the order would ban fund transfers involving the exchange by any local financial institution. The FinCEN order will be effective February 1, 2023, as it seeks to ensure the orderly implementation of guidelines and adequately address the threats posed by entities like Bitzlato.
Connection With Russian Bad Actors
The US Department of Justice (DoJ) and the Treasury Department have officially charged Bitzlato with money laundering following the arrest of its founder in Miami. The United States authorities ordered the shutdown of the Hong Kong-based crypto exchange due to its ties with criminal elements linked to Russia.
According to the US deputy attorney general, Lisa Monaco, the enforcement action is coordinated by the various state regulators, which succeeded in busting the criminal activities on the Bitzlato platform. With FinCEN labeling the exchange as a “primary money laundering concern,” the US government has slammed the hammer on Bitzlato by cutting it off from the world’s financial ecosystem.
Bitzlato’s founder, Anatoly Legkodymov, is a Russian citizen living in China. Following his arrest in Miami, he has been scheduled to appear in the US District Court for the Southern District of Florida.
The recent crackdown on Bitzlato is the most significant action the US has taken against crypto criminal entities to date. Accordingly, the United States authorities seized the company’s servers, through which FinCEN discovered that the exchange has frequent transactions with Russian-based criminal enterprises.
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