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According to the FinCEN order, Bitzlato has been used to launder as much as $700 million since its inception, and according to the terms of the order, the regulator wants the named counterparties to stop doing business with Bitzlato.
The United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has named the Binance exchange, the largest crypto trading platform in the world, as one of the counterparties in the order, it just issued against Bitzlato exchange. According to the release from FinCEN, Bitzlato is incorporated in Hong Kong and it represents a primary source of money laundering for Russian illicit finance.
The FinCEN said Bitzlato has an extensive operation in facilitating “deposits and funds transfers by Russian ransomware groups or affiliates, such as Conti” as well as its core roles in pushing illicit financial transactions for the “Russian darknet markets on behalf of both darknet customers and darknet vendors.”
Bitzlato is not the only platform in the world that may be involved in related illicit transactional activities, but it comes off as the one the government has beamed its radar on in recent times. According to the regulator, Bitzlato has different counterparties it sends money and receives funds from.
The top three listed include Binance, darknet market Hydra and The Finiko, a Russian Ponzi Scheme network.
“Approximately two-thirds of Bitzlato’s top receiving and sending counterparties are associated with darknet markets or scams. For example, Bitzlato’s top three receiving counterparties, by total amount of BTC received between May 2018 and September 2022 were: (1) Binance, a VASP; (2) the Russia-connected darknet market Hydra; and (3) the alleged Russia-based Ponzi scheme “TheFiniko,” the order said.
According to the FinCEN order, Bitzlato has been used to launder as much as $700 million since its inception, and according to the terms of the order, the regulator wants the named counterparties to stop doing business with Bitzlato in order to stop enabling the flow of funds from bad Russian actors.
Binance Helped FinCEN in Bitzlato Investigation
Following the break of the news that Binance is one of the counterparties linked to Bitzlato, the trading platform has come out to say it helped FinCEN in its investigation into the Hong Kong-based entity.
“Binance 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,” a Binance spokesperson said.
Over the course of the past 12 months, the United States authorities have been up and doing with respect to the sanctioning of blockchain-based platforms that have ties to illicit activities. Back in May last year, the regulator sanctioned wallets connected to Blender.io, a crypto mixer for its alleged ties to the Lazarus Group, a hacking syndicate from North Korea.
Later in the year, the Treasury’s OFAC office also sanctioned another crypto mixer, Tornado Cash, a move that stirred up protests from the broader crypto ecosystem. Leaders and organizations rebelled against the regulator noting that sanctioning a piece of technology for how it is being used is an affront to innovation.
OFAC refused to rescind its sanctions, stirring a significant plunge in the usage of Tornado Cash in general.