US Regulators Strike Down Bitzlato for a $700M Crypto Crime

  • $700 million worth of cryptos moved via Bitzlato were linked to illicit trades.
  • Bitzlato is a not-so-famous exchange with just 1.5k Twitter followers.

Hong Kong-origin crypto exchange Bitzlato is shut down by the trio-union regulators – the US Department of Justice, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), and French Law Enforcement. As per charges, the exchange is subjected to international enforcement action against money laundering and crypto crimes.

U.S. Attorney Breon Peace asserted:

“Bitzlato sold itself to criminals as a no-questions-asked cryptocurrency exchange, and reaped hundreds of millions of dollars’ worth of deposits as a result. The defendant is now paying the price for the malign role that his company played in the cryptocurrency ecosystem.”

Through a Wednesday report, DOJ announced the arrest of Anatoly Legkodymov, the co-founder of Bitzlato, in Miami on Tuesday. He has violated the laws by allowing criminals to launder, store and move illicit funds on and off the exchange. Moreover, as per DOJ sources, Legkodymov revealed that major Bitzlato users were “known to be crooks” in one of his internal chats.

Bitzlato – “Safe Haven” For Crypto Crimes?

Nearly $700 million worth of cryptocurrencies traded on Bitzlato were wired directly from the Hydra Markets, the vast Russian darknet market that was taken down by the Germans in April 2022. This was also a reason why US DOJ officials regarded the exchange as “the China-based money laundering engine that fueled a high-tech axis of crypto crime.”

As a matter of fact, Bitzlato’s affinity to illicit trades was not a piece of inconspicuous or recent news. Its involvement with darknet markets and scams was reported during Q1 2022 by Chainalysis, a prominent blockchain analytic firm.

In its February 2022 report, Chainalysis stated:

“Bitzlato has received $206 million from darknet markets, $224.5 million from scams, and $9 million from ransomware attackers.”

The gloomy tidings – Bitzlato shut down and the renowned crypto lender Genesis nearing its bankruptcy filing – had drained the recent positive rally of the crypto market. Evidently, the global crypto market cap has dropped 2.5% in the last 24h, from a trillion to billions at press time. At the time of writing, Bitcoin traded below $21,000 and Ethereum in the range of $1,530.

Keeping these aside, the curious crypto community continues to decode and hypothesize several conspiracy theories. For instance, the act of the US DOJ charging a low-profile exchange with a crucial crypto crime history like Bitzlato is scrutinized as a ‘neuralyzer’ attempt to lower FTX-SBF chaos’ intensity.

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A perpetual learner who loves writing. Passionate about investing her time and zeal to explore the crypto world. Curiosity and creativity are her superpowers.