Bitzlato received €1B from criminals, with $346M flowing to Binance: Europol

Bitzlato received over a billion euros from criminal entities, most of which was then converted to Russian rubles, the European Union Agency for Law Enforcement Cooperation (Europol) has revealed.

In a statement, Europol confirmed it led a crackdown that resulted in the arrest of senior management at the exchange. It also took down the digital infrastructure of the exchange, which was based in France.

🚨 #Bitzlato: senior management arrested.

The operation, led by 🇫🇷 & 🇺🇸 authorities with Europol support, took down the service's digital infrastructure in France.

👥 Leading members of the platform's management were also interrogated.

Press release ⤵️https://t.co/k0dGy3rNQk pic.twitter.com/lv5stazDeY

— Europol (@Europol) January 23, 2023

As CoinGeek reported, U.S. authorities nabbed and charged Anatoly Legkodymov, the majority owner of Bitzlato, for facilitating the transfer of illicit funds. The exchange, formerly known as Changebot, was closely linked to Hydra, a defunct dark web marketplace that was the largest globally before its seizure by U.S. authorities in April 2022.

Europol now claims that Bitzlato received over 2.1 billion euros ($2.3 billion) in BTC, Dogecoin, Ether, Litecoin, BCH, and other digital assets. An estimated 46% of the assets, or about $1.1 billion, had links to criminal activities.

Blockchain analysis by the European law enforcement agency revealed that most entities transacting on Bitzlato were sanctioned by the U.S. Treasury. It also found links to money laundering, ransomware, and child abuse-related funds.

Europol found extensive links between Bitzlato and Hydra. It claimed that there were 1.5 million BTC transactions between the two entities.

Working with law enforcement agencies in Cyprus, the Netherlands, Spain, Portugal, France, and Belgium, Europol’s crackdown led to the arrest of five individuals. It conducted eight house searches across Europe and the U.S. and seized digital asset wallets worth about $19.5 million. It also froze over 100 accounts at other exchanges holding about $55 million.

Binance moved $346 million for Bitzlato: report

Whenever crime in the digital asset sector comes up, Binance rarely misses out as a key player enabling criminals to seamlessly move illicit funds across the world. With Bitzlato, it’s no different.

A new report by Reuters has revealed that Binance processed over $300 million for the Hong Kong-based exchange. The report revealed that Binance was one of the top three Bitzlato counterparties by the number of BTC transacted between 2018 and 2022, alongside Hydra and peer-to-peer marketplace LocalBitcoins.

An analysis by Chainalysis found that Binance processed over 200,000 transactions, moving over 20,000 BTC (worth $345.8 million at the time) for Bitzlato.

Chainalysis further revealed that about $90 million of the transfers between the two entities occurred after August 2021, when Binance announced enhanced verification and KYC measures. At the time, the exchange claimed it would be stringent on identification for its users to “tackle the funding and laundering of money from illicit activities.”

At this point, it’s no surprise that Binance was saying one thing and doing a completely different thing. In recent years, almost every other cybercrime group has been revealed to rely on Binance to cash out their illicit funds. Reuters reported last year that over $10 billion in illegal funds flowed through Binance despite its supposed “enhanced KYC and AML checks.” Changpeng Zhao was also found to have instructed his subordinates to intentionally observe weak AML controls to push the exchange’s growth.

While it’s a wonder Binance has survived this long, its end is nigh. Regulators are already investigating the exchange for its continued violations, and the links to Bitzlato could be the straw that breaks the camel’s back.

As Deputy Attorney General Lisa Monaco noted last week, operating without physical headquarters won’t protect CZ and his cronies anymore.

“Operating offshore or moving your servers out of the continental U.S. will not shield you. Whether you break our laws from China or Europe or abuse our financial system from a tropical island—you can expect to answer for your crimes inside a United States courtroom.”

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple, Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.