Binance was the best thoroughfare for Bitzlato Crypto Exchange

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US authorities have reportedly been investigating Binance for nearly four years. Recent enforcement actions against Binance-related entities put even more pressure on the world’s largest exchange. Photo: salarko (Shutterstock)

Binance, the world’s largest crypto exchange, has been tied to a federally charged crypto company and its founder with nearly $346 million in bitcoins. This comes after months of speculation that federal prosecutors are zeroing in on Binance for allegedly facilitating illicit money laundering.

On Tuesday, Reuters reported that $346 million passed through Binance through federally cited crypto exchange Bitzlato, according to blockchain data from Chainalysis. Bitzlato had been cited for acting as some sort of no-questions-asked cryptocurrency exchange that allegedly allowed $700 million in criminal proceeds to pass through. During this time, Binance was just one of three major parties that received these funds from 2018 through mid-2022, according to the Treasury Departments Financial Crimes Network (otherwise known as FinCEN).

Although Binance was previously cited as a major player in Bitzlato’s arrest by blockchain analytics firm Arkham Intelligence and in a CNBC report, this is the first time we’ve received a figure indicating how much of this money went through Binance. However, it remains unclear how much of that $346 million came from funds from malicious actors.

All this noise around Bitzlato puts more emphasis on Binance. The news also comes on the heels of a weird week in federal crypto enforcement. Last Wednesday, the US Department of Justice made a big deal of the charges it planned to drop regarding some sort of major international crypto bust. After all the drama surrounding the collapse of FTX and the arrest of its founder Sam Bankman-Fried, the crypto community sat on the edge of its seats.

In a press conference, Deputy Attorney General Lisa Monaco said she arrested Anatoly Legkodymov, a Russian national living in China who ran crypto exchange Bitzlato. Alongside FinCEN, it has been accused of facilitating money laundering for crypto criminals.

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There were more than a few people deep in the crypto community who collectively shrugged their shoulders and asked wait, who is it? Bitzlato was a small exchange, barely on the register of most of the western crypto community. Other parties Bitzlato allegedly used to transact funds included Hydra, an all-in-one darknet drug store, as well as TheFiniko, which FinCEN described as a Russia-based Ponzi scheme. Beyond Legkodymov, Reuters quoted former banking regulator Ross Delta as saying this would only draw prosecutors more attention to Binance, particularly its compliance monitoring and know-your-customer systems.

Last December, Reuters first reported that federal Justice Department prosecutors were split on whether to charge Binance and its executives, including CEO Changpeng Zhao, with multiple financial crimes. Four unnamed sources told Reuters that Binance had been under investigation over the past four years for violating money laundering and sanctions laws, particularly over how the exchange allowed Iranians to trade on the platform despite US sanctions. Prosecutors were split on whether to gather more evidence or charge the company immediately.

Gizmodo contacted Binance for comment on its client compliance checks with Bitzlato, but we did not immediately hear back. A spokesperson for the exchange told Reuters that Binance provided assistance to law enforcement investigating Bitzlato.

Besides ending the lawsuits, Binance is also desperately trying to show that it won’t go down like FTX did just a few months ago. On Tuesday, Binance admitted to Bloomberg that it mistakenly held on to part of its collateral for 94 tokens it regularly issues in the same wallet as client funds. The company told the outlet that it was working to remove the collateral funds from the client’s wallet, while claiming its assets were 100% secured. Binance previously relied on a limited audit of its finances to show that its assets were secured, although the company conducting the audit terminated its relationship with crypto companies. For now, all customers have only the word of Binance and its executives.

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