- Binance was the top counterparty receiving bitcoin from Bitzlato, shut down by US authorities Wednesday.
- They say the crypto platform processed millions in funds from drug dealers and Russian criminals.
- Binance, the world’s biggest crypto exchange, said it gave “substantial” help to the investigation.
Binance was the top receiver of bitcoin from a little-known crypto platform shut down by US authorities, who say it laundered $700 million worth of criminals’ ill-gotten gains.
Police arrested Anatoly Legkodymov, Bitzlato’s Russian founder and majority shareholder, in Miami on Tuesday, on charges that the exchange helped to hide money for drug dealers and illegal gamblers.
Binance — the world’s biggest crypto exchange — was top of the leading three receiving counterparties for Legkodymov’s company for over two years, according to the Financial Crimes Enforcement Network.
“Approximately two-thirds of Bitzlato’s top receiving and sending counterparties are associated with darknet markets or scams,” FinCEN, a Treasury Department unit, said in an order published Wednesday.
Russian darkweb marketplace Hydra and a Russia-based alleged crypto Ponzi scheme called “TheFiniko” were the other top handlers of Bitzlato’s bitcoin, according to the filing.
“Binance is pleased to have provided substantial assistance to international law enforcement partners in support of this investigation,” a spokesperson for the exchange told Insider. “This exemplifies Binance’s commitment to working collaboratively with law enforcement partners worldwide.”
The Justice Department described Bitzlato as a “China-based money-laundering engine that fueled a high-tech axis of cryptocrime,” in a press conference Wednesday.
FinCEN started investigating the Hong Kong-registered platform after authorities discovered almost 50% of Bitzlato’s recorded transactions involved illicit Russian finances or came from other suspicious sources, according to deputy Treasury Secretary Wally Adeyemo.
“Bitzlato was particularly active in facilitating illicit activity, but it is ultimately part of a larger, larger ecosystem of cyber criminals that are allowed to operate with impunity within Russia,” he said.
Bitzlato is a small crypto exchange, which hasn’t received mainstream attention until Legkodymov’s arrest. The website offered users peer-to-peer transaction services that Justice Department officials allege were tied to criminals buying and selling illicit goods.
This isn’t the first time that Binance has been named in a US federal investigation into money laundering.
The Justice Department is currently probing its role in helping companies from Iran to trade funds despite US sanctions – with the exchange processing just under $8 billion worth of Iranian transactions since 2018, according to data from the blockchain research firm Chainalysis.