On Wednesday, the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) announced that it had issued an order against Bitzlato Limited, a Hong Kong-registered cryptocurrency exchange, identifying it as a "primary money laundering concern" in connection with Russian illicit finance. Specifically, the order states that Bitzlato laundered proceeds from ransomware attacks, facilitated darknet markets and scams, and engaged in significant volume of Russian illicit finance transactions. "Bitzlato poses a global threat by allowing Russian cybercriminals and ransomware actors to launder the proceeds of their theft. ... We will continue to leverage the full range of our authorities to prohibit these institutions from gaining access to the U.S. financial system and using it to support Russian illicit finance," said the FinCEN Acting Director. In the announcement, FinCEN also noted that the order was the first order issued pursuant to section 9714(a) of the Combating Russian Money Laundering Act, and that it highlights the serious threat that business operations that support Russian illicit finance pose to U.S. security and the U.S. financial sector. According to the FinCEN announcement, "As described in the order, effective February 1, 2023, covered financial institutions are prohibited from engaging in a transmittal of funds from or to Bitzlato, or from or to any account or CVC address administered by or on behalf of Bitzlato."
On the same day, the U.S. Department of Justice (DOJ) published a press release announcing the unsealing of a complaint charging Bitzlato's founder and majority shareholder in connection with Bitzlato's illicit activity. According to the press release, Bitzlato's founder was arrested in Miami. Concurrent with his arrest, French authorities, working with Europol and partners in Spain, Portugal and Cyprus, dismantled Bitzlato's digital infrastructure and also took enforcement actions. Among other things, the DOJ press release notes that Bitzlato "marketed itself as requiring minimal identification from its users"; "received more than $15 million in ransomware proceeds"; and had as its largest counterparty "Hydra Market ... the largest and longest running darknet market in the world." According to the DOJ press release, "although Bitzlato claimed not to accept users from the United States, it did substantial business with U.S.-based customers, and its customer service representatives repeatedly advised users that they could transfer funds from U.S. financial institutions."
For more information, please refer to the following links:
- FinCEN Identifies Virtual Currency Exchange Bitzlato as a "Primary Money Laundering Concern" in Connection with Russian Illicit Finance
- Founder and Majority Owner of Bitzlato, a Cryptocurrency Exchange, Charged with Unlicensed Money Transmitting
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