Bitzlato suspends withdrawals as co-founder pleads guilty to charges of illicit transfers in the US
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A lesser-known crypto exchange known as Bitzlato recently suspended its special balance withdrawals, as well as the platform’s technical support. The move was made after the exchange’s co-founder, Anatoly Legkodymov, pleaded guilty to charges of making an illicit $700 million transfer in the US.
Following the guilty plea, he agreed to dissolve the exchange and forfeit $23 million in digital currencies for operating a money service business without having a license to do so.
Bitzlato tries to reassure users despite facing operational challenges
The decision to dissolve the exchange, halt the withdrawals, and suspend the platform’s technical support was announced on the exchange’s Telegram channel. In it, the exchange’s management said that this is a temporary measure made in preparation for the upcoming court hearings regarding the seizure of user assets in France.
The announcement also said that the exchange is determined and optimistic about the issue, suggesting that it believes that the matter can be resolved and that the platform might get back to business at some point in the future.
However, despite these efforts to reassure its customers, Bitzlato has been facing operational challenges that might not be so easily resolved. Earlier this year, its founder was arrested in Miami, which led to a number of cooperating law enforcement agencies from France, the US, as well as other European nations, to seize the exchange’s infrastructure.
The crackdown on Bitzlato came as part of a larger investigation into the exchange and its suspected involvement in money laundering activities. The exchange is also believed to have ties to a darknet marketplace known as Hydra.
Since then, the exchange managed to partially restore access to users’ funds back in March of this year. This allowed it to let its customers withdraw up to 50% through the use of a Telegram bot. Later on, in November of this year, the limit was raised from 50% to 70%.
Nearly half of the seized funds have ties to illicit activities
According to the US Department of Justice’s case against the Bitzlato exchange, the authorities seem to believe that the platform has served as a key financial resource for criminal activities. It is believed that it had participated in laundering money that came from a variety of ransomware attacks.
Nearly half of the exchange’s assets — around 46% of $1 billion that the authorities had seized during their raid — were since linked to a number of entities that were previously sanctioned by the US Department of Treasury’s Office of Foreign Asset Control. Some of the funds were also confirmed to have been involved with money laundering, cyber scams, and ransomware attacks.
