Binance Appears to be a Key Player in Bitzlato's Money Laundering Scam

Binance has been connected to a federally accused crypto corporation and its creator, who handled almost $346 million in bitcoin.

The news confirms months of rumors that the US government is investigating the biggest cryptocurrency exchange for enabling illegal money transfers, as reported by Gizmodo.

Binance and Bitzlato Tie-up

Reuters said on Tuesday, Jan. 24, that the nationally cited crypto trading Bitzlato had sent $346 million via Binance, per blockchain data from Chainalysis. Bitzlato was accused of serving as a "no-questions-asked cryptocurrency exchange" that enabled $700 million in illicit funds to pass through.

According to the Financial Crimes Enforcement Network of the US Treasury (FinCEN), Binance was one of three primary parties that received this money between January 1, 2018, and June 30, 2022.

In the past, blockchain monitoring company Arkham Intelligence and a CNBC investigation both named Binance as a prominent player in the Bitzlato arrest. But this is the first time a specific dollar amount has been associated with Binance's role in the case.

It is yet unclear how much of that $346 million came from malicious attackers.

Amid all the fuss around Bitzlato, Binance has emerged as the clear frontrunner.

Case Background

Deputy Attorney General Lisa Monaco stated at a news conference the arrest of Anatoly Legkodymov, a Russian citizen residing in China and the head of the crypto exchange Bitzlato. He was arrested by FinCEN and others for allegedly helping bitcoin thieves launder their earnings.

FinCEN claims that Bitzlato also dealt with the dark web pharmacy known as Hydra and the "alleged Russia-based Ponzi scam" TheFiniko.

In addition to Legkodymov, Reuters also quoted former banking regulator Ross Delta, who predicted that Binance would face more scrutiny from prosecutors due to the exchange's weak compliance check and know-your-customer (KYC) procedures.

In December 2022, Federal prosecutors at the Department of Justice were reportedly divided on whether to prosecute Binance and its executives, including CEO Changpeng Zhao, for several financial crimes.

Binance has allegedly been under investigation for money laundering and sanctions violations for the last four years, with four unnamed individuals saying that the exchange allowed Iranians to trade on the site despite US prohibitions.

Members of the prosecution were undecided on whether or not to delay filing charges against the corporation until additional evidence was gathered.

The Crypto Sector

This development follows a peculiar week for federal crypto enforcement, according to Gizmodo.

The US Department of Justice made headlines last Wednesday, Jan. 18, by announcing that they would be dropping charges related to a massive worldwide crypto raid. The crypto community was on the edge of its seats after the failure of FTX and the arrest of its creator, Sam Bankman-Fried.