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In its investigation, FinCEN found that Binance was among the top three counterparties having links to Bitzlato.
Last week, the US Justice Department shuttered crypto exchange Bitzlato over allegations of money laundering and arrested its founder in Miami. However, the latest report by Reuters suggests that crypto giant Binance had reportedly processed $346 million worth of Bitcoin for Bitzlato.
Binance and Bitzlato
On January 18, the Justice Department charged Bitzlato founder Anatoly Legkodymov for operating an unlicensed money exchange fueling “a high-tech axis of crypto crime” and processing $700 million worth of illicit funds.
The Justice Department said that Bitzlato didn’t conduct enough background checks on its clients. They further added that even though Bitzlato conducted enough background checks for its clients, “it repeatedly allowed them to provide information belonging to “straw man” registrants”.
As per the data compiled by blockchain analytics firm Chainalysis, crypto exchange Binance had processed more than 20,000 Bitcoins in over 205,000 transactions for Bitzlato since 2018. This nearly amounts to a staggering $346 million.
As per the US Treasury’s Financial Crimes Enforcement Network (FinCEN), Binance was among the top three counterparties of the shuttered crypto exchange Bitzlato. FinCEN said that Binance was the only crypto exchange among Bitzlato’s top counterparties.
Furthermore, $175 million was directly transferred from Bitzlato to Binance, which also makes Binance the largest receiver of funds. The interesting is that $90 million of those transfers occurred after August 2021. It was the same month that Binance implemented identity checks as part of its Anti-Money Laundering Program.
Concerns with Bitzlato
In its investigation, FinCEN added that Bitzlato was the “primary money laundering concern” related to Russia’s illicit financing. From February 1, FinCEN announced a total ban on the transfer of funds to Bitzlato from the US.
In an email to Reuters, a Binance spokesperson said that they have provided “substantial assistance” to FinCEN in order to support their investigation. Binance noted that it is committed to “working collaboratively” with law enforcement.
Kirill Doronin, a lawyer for Finiko’s founder, said FinCEN’s statement was “unfortunate for him, as he continues to hope for the return of the cryptocurrency to investors from the people that stole it.”
Finland-based LocalBitcoins also clarified it has never had “any kind of cooperation or relationship” with Bitzlato. However, it said that some P2P traders at LocalBitcoins “would also have been trading in BitZlato’s P2P market”. But there were no transactions between LocalBitcoins and Bitzlato post-October 2022.
Reuters noted that although the name of Binance and LocalBitcoins appear, there’s no evidence of any breaking of rules by these platforms.