According to Chainalysis research, Binance crypto exchange processed almost $346M in illicit Bitcoin (BTC) funds for seized cryptocurrency exchange Bitzlato.
Bitzlato’s Russian co-founder Anatoly Legkodymov was arrested in Miami last week on charges of operating the platform as an unlicensed money exchange business and processing $700M in illegal funds.
Reportedly, Legkodymov admitted to catering to “known crooks” through the medium of the cryptocurrency exchange. On 18 January, 2023, he was charged by the US Justice Department for fueling a “high-tech axis of cryptocrime”.
Binance’s role in Bitzlato’s money laundering spree
Between May 2018 and September 2022, it is reported that Binance was among Bitzlato’s top three Bitcoin-receiving counterparties, the others being Hydra, a Russia-connected darknet market, and “TheFiniko”, the supposed Russia-based Ponzi scheme.
In the same period, the seized cryptocurrency exchange’s top three Bitcoin-sending counterparties were Hydra, LocalBitcoins, a VASP incorporated in Finland, and “TheFiniko”.
According to the US Treasury’s Financial Crimes Enforcement Network (FinCEN), each of these sending/receiving counterparties is associated with illicit activities, and a majority of them have substantial ties and/or operations in Russia.
It is evident that Binance is the only high-end cryptocurrency trading platform among Bitzlato’s top sending/receiving counterparties.
According to Chainalysis research, Binance crypto platform moved more than 20,000 BTC, worth about ~$346M at the time, across 205,000 transactions, between May 2018 and the time of Bitzlato’s closure (last week).
Around $175M worth of Bitcoin was transferred from the seized trading platform to the crypto exchange in this period, making it the largest receiving counterparty of Bitzlato.
Nearly $90M of these transfers took place after August 2021. What adds interest to this is that the Binance crypto exchange had enforced mandatory user identification at this point to combat financial crimes.
Furthermore, in a blog last year, Binance said this would help tackle “the funding and laundering of money from illicit activities”. Moni Talks could not confirm whether the identification check was enforced in dealings with the seized cryptocurrency platform.
It is worth noting that Binance is providing assistance to international law enforcement in the quest to support the Bitzlato investigation. Currently, it is unclear whether the trading platform’s financial dealings with Bitzlato are under judicial review.
The news has been met with a downturn in crypto markets, as top cryptocurrencies have tumbled in price.