DOJ charges tiny crypto exchange Bitzlato with money laundering after teasing ‘major’ crypto announcement

After a hellish 2022, was crypto’s biggest reckoning about to hit in the first few weeks of 2023? That’s what many thought after word spread quickly Wednesday from the US Department of Justice about an upcoming press conference announcing a “major international cryptocurrency crackdown.”

Many assumed that the announcement could very well be about the world’s largest crypto exchange, Binance. And the news from the DOJ was indeed about a crypto exchange. And the name of that exchange? Bitzlato!

No, it’s not Binance…but they both start with “B.” Close enough, right? Not really.

According to crypto analysis firm Arkham, Bitzlato-associated crypto wallets were held not more over $6 million at its peak. So, what’s the deal with Bitzlato? How did this small crypto exchange end up on America’s radar?

DOJ notified that the company has been charged with money laundering for unauthorized money transfers. According to the DOJ’s press release, Bitzlato “operated a money transfer operation that transported and transferred illicit funds and failed to comply with US regulatory safeguards, including anti-money laundering requirements.”

Prosecutors also announced that the founder of the Hong Kong-based crypto exchange, Russian national Anatoly Legkodymov, was arrested in Miami on Tuesday night. If convicted, Legkodymov faces a maximum of 5 years in prison for running an illegal money transfer.

And what likely caught the attention of US officials were the crypto exchanges’ connections to the dark web market, the Hydro Market. Users of the illegal marketplace, where they can buy drugs, stolen credit cards and more, had exchanged more than $700 million in cryptocurrency with Bitzlato. The exchange also received “more than $15 million in ransomware proceeds,” according to the DOJ.

Still, it was strange that the DOJ made a big deal about a rather insignificant player in the crypto industry, even going so far as to categorize it as a “major international cryptocurrency action.”

On social media, crypto users prepared for the worst before the news broke. In a post-FTX collapse world, any major player seems vulnerable. In fact, just last month, a Reuters reports shared that the DOJ had been investigating Binance for the past four years regarding potential money laundering and criminal sanctions violations. It seemed like something big was about to fall.

Instead, the US Department of Justice’s big news was about Bitzlato, a company that many in the industry had never even heard of until today.


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