According to the order issued by FinCEN, Bitzlato has been used to facilitate (1) the laundering of up to $700 million in illicit funds since the company's inception. The terms of the order state that the regulator desires the named financial institutions to terminate their business relationships with Bitzlato.
The Financial Crimes Enforcement Network (FinCEN), part of the United States Treasury Department, has just issued an order against the Bitzlato exchange. It has named the Binance exchange, the world's largest crypto currency trading exchange, as one of the counterparties in the order.
According to the announcement FinCEN issued, Bitzlato is a corporation founded in Hong Kong and is a crucial source of money laundering for illegal Russian financial transactions.
According to FinCEN, Bitzlato operates a large-scale business that helps facilitate "deposits and funds transactions by Russian spyware groups or affiliates, such as Conti." Moreover, it played a central role in pushing illegal financial transactions for "Russian black markets on behest including both darknet clients and darknet vendors."
Although Bitzlato isn't the only site in the globe that could be involved in illicit transactional operations, it appears to be the one on which the government has been focusing its attention in recent times. According to the regulating body, Bitzlato deals with various counterparties in terms of sending and receiving monetary transactions.
"Approximately two-thirds of the top acquiring and transmitting partners on Bitzlato are involved with darknet markets or frauds. According to the order, Bitzlato's top three receiving counterparties, ranked by the total amount of Bitcoin they received between May 2018 and September 2022, were: Binance, the darknet market Hydra, and Russia-based Ponzi scheme "TheFiniko."
According to FinCEN's order, Bitzlato has been used to launder as much as $700 million since it was first established. The terms of the order state that the controller wants the titled parties to a contract to cease doing business with Bitzlato in order to prevent allowing the flow of money from malicious Russian actors.
FinCEN Acknowledges Binance's Assistance in the Bitzlato Investigation
After the news broke that Binance was one of the parties connected to Bitzlato, the trading platform stated that it assisted FinCEN in its probe into the Hong Kong-based firm. This came after the news broke that Binance is one of the middlemen related to Bitzlato.
"Binance is glad to have offered a large amount of help to global law enforcement agencies in aid of this inquiry. An official spokesman for Binance stated that this reflects the company's dedication to working with law enforcement agencies worldwide.”
The authorities in the United States have been quite active over the last year in terms of banning blockchain-based platforms which have connections to illegal activity. They have done this to prevent criminals from using these platforms.
The regulatory agency imposed sanctions on wallets linked to Blender.io, a crypto currency mixer, in May of the previous year due to the company's claimed connections to the Lazarus Group, a cyber ring originating in North Korea.
Last year, the Office of Foreign Assets Control of the United States Treasury sanctioned another crypto currency mixer known as Tornado Cash, a move that sparked objections from the larger crypto currency sector.
Leaders and groups rose up in defiance of the regulator, citing that punishing a technology piece for how it is being utilized is an insult to innovation as the justification for their actions.
Because OFAC did not lift its penalties, there was a steep fall in the number of transactions with Tornado Cash.