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DOJ charges tiny crypto exchange Bitzlato with money laundering after teasing ‘major’ crypto announcement

doj charges tiny crypto exchange bitzlato with money laundering after teasing major crypto announcement 63c9410b8c698

After a hellish 2022, was crypto’s biggest reckoning about to hit in the first weeks of 2023? That’s what many thought after word quickly spread on Wednesday from the United States Department of Justice about an upcoming press conference announcing a “major international cryptocurrency action.”

Many assumed the announcement could very possibly be about the world’s largest crypto exchange, Binance. And the news from the DOJ was indeed about a crypto exchange. And the name of that exchange? Bitzlato!

No, that’s not Binance…but they both start with “B.” Close enough, right? Not quite.

According to crypto analytics firm Arkham, Bitzlato-associated crypto wallets held no more(Opens in a new window) than $6 million at its peak. So, what’s the deal with Bitzlato? How did this tiny crypto exchange end up on the U.S.’s radar?

The DOJ announced(Opens in a new window) that the company was charged with money laundering for unlicensed money transmitting. According to the DOJ’s press released, Bitzlato was “conducting a money transmitting business that transported and transmitted illicit funds and that failed to meet U.S. regulatory safeguards, including anti-money laundering requirements.”

Prosecutors also announced that the Hong Kong-based crypto exchange’s founder, Russian national Anatoly Legkodymov, was arrested in Miami on Tuesday night. If convicted, Legkodymov faces a maximum of 5 years in prison for running an illegal money transmitting business.

And what likely caught the attention of U.S. officials was the crypto exchanges’ connections to dark web marketplace, Hydro Market. Users on the illicit marketplace, where they can buy drugs, stolen credit cards, and more, had exchanged more than $700 million in cryptocurrency with Bitzlato. The exchange also received “more than $15 million in ransomware proceeds” according to the DOJ.

Still, it was odd that the DOJ made a big deal about a rather inconsequential player in the crypto industry, even going so far as to categorize it as a “major international cryptocurrency action.”

On social media, crypto users were preparing for the worst before the news dropped. In a post-FTX collapse world, any major player seems vulnerable. In fact, just last month, a Reuters report(Opens in a new window) shared that the DOJ had been investigating Binance for the past four years over potential money laundering and criminal sanctions violations. It seemed like something big was about to drop.

Instead the U.S. Dept. of Justice’s big news was about Bitzlato, a company many in the industry had never even heard of until today.

What do you think?

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Written by yulica

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