Binance Identified as Top Counterparty to $700M Criminal Crypto Exchange by FinCEN

The Financial Crimes and Enforcement Network (FinCEN) identified and Hydra as two of the top three eceiving counterparties of Bitzlato, a Russian P2P exchange whose owner was recently charged with money laundering.

According to fincen , binance, darknet market hydra, and a Russian ponzi system called "le finiko," were bitzlato three main counterparties addressees. The three main counterparties of consignment of bitzlato were hydra, Finland p2p LOCALBITCOINS exchange, and "finik." most counterparties "have obvious connections to and/or large operations in Russia," the report says.

Binance’s Counterparty Had Poor AML/KYC

According to U.S. Deputy Attorney General Lisa Monaco, Bitzlato facilitated customer transactions between itself and several darknet marketplaces, including Hydra. Monaco announced a national enforcement team on cryptocurrencies in 2021 to combat "crimes committed through virtual currency exchanges, the blending and tumbling of services, and actors in the money laundering infrastructure."

Breon Peace, He's an American lawyer in Brooklyn, The New York City office is suing, said Bitzlato has reportedly turned the exchange into a haven for criminals thanks to weak KYC policies. A user could have registered with just one e-mail address and no photo.

The Department of Justice claims that Bitzlato paid $700 million to cover up illegal drug and gambling transactions.

Bloomberg reported on Jan. 18, 2022, that the CEO of Bitzlato, Anatoly Legkodymov, allegedly admitted over an internal chat that most of Bitzlato’s clients were criminals.

Surveillance of illicit financing policies.

Binance’s involvement with Bizlato is likely to raise a few eyebrows, considering the exchange’s previous run-ins with law enforcement. Bloomberg first reported that the DoJ and the Internal Revenue service sought key compliance information from BINANCE in 2021.

Reuters reported in Sep. In 2022, the Department of Justice asked for detailed records on Binance's anti-money laundering and know-your-client processes. He also asked the exchange to disclose Zhao's correspondence with other senior officials about Binance's ability to detect illegal transactions. The result of the application could not be determined at that point.

After interviews with several former senior employees and partners and reviewing confidential Binance correspondence, Reuters reported in Jan. 2022 that Binance had been cagey about its finances and corporate governance when applying for registration in Malta. He would also have gone against the recommendations of his own compliance department, in spite of the changpeng zhao CEO publicly courting regulation. 

Three months later, Reuters that binance had been processing billions in payments for sanctioned entities and criminals. Binance then referred to the reports as inaccurate, describing parts of the Reuters conclusions as outdated and incorrect.

Speaking at a recent fireside chat at the 2023 World Economic Forum summit in Davos, Changpeng Zhao emphasized the need for the industry to regain trust and start working with regulators after several crypto implosions in 2022. He also slammed the bitzlato news as pure fud, along with other commentators suggesting that the security forces were using bitzlato to construct a case against binance.