The situation with Bitzlato is quite serious. As noted by the US Department of Justice, they have launched an anti-fraud campaign within the cryptocurrency industry, and the first step in this initiative was the arrest of the platform’s founder, Anatoly Legkodimov. He was detained in Miami by the FBI.

First of all, the platform is accused of being involved in money laundering on a large scale. According to the prosecution, from 2018 to 2022, the volume of illegal transactions through Bitzlato amounted to the equivalent of 700 million dollars.

FBI officials

However, the company’s sins do not end there. As it became clear from the case file from the US authorities, the founders of Bitzlato were aware that its users were buying other people’s accounts in order not to disclose their identities, and Bitzlato management did not oppose this state of affairs. In other words, users were using other people’s accounts, which is not allowed on popular trading platforms.

This became clear thanks to correspondence between the Help Desk and an unnamed user dated 7 May 2022, which was published by the US Department of Justice. At that time he was asked to provide additional documents to confirm his identity.

In response the user explicitly said that he bought someone else’s account, but now he will try to contact the former owner. So the Bitzlato representatives understood that this was not the person whose documents were used to prove his identity on the exchange – and on other trading platforms this would have been enough to block the account. However, the Bitzlato staff said that “it was his right”.

Here is the relevant case material.

Bitzlato’s case file on the Bitzlato exchange regarding other people’s accounts

And here’s a quote from it.

On or about May 7, 2022, a Bitzlato user was asked for identity information. In response he stated that “I’m not going to lie and tell tales. I bought this account, I bought it, I tell you”. The user also added that there are hundreds of Bitzlato accounts for sale with verified identities that have been verified, as if they didn’t know about it. The user offered to find the person whose details he used for authorisation and pay him to send all the necessary documents, because “the money is mine”.

The head of marketing had also previously done a comparison of his own platform with competitors and shared his findings. It turned out that the lack of identity verification procedure was credited by them to the pluses of the exchanger, well, among the minuses noted “dirty money”, the abundance of scams and quite high withdrawal fees. This means that Bitzlato staff understood the purpose for which some users were using the exchanger.

Bitzlato case documents from the authorities describing the advantages and disadvantages of the platform

By the way, Binance employees have already reported that they were the ones who helped shut down the platform. In this way, exchange representatives want to reaffirm their own commitment to regulations and establish good relations with various government agencies. It has now turned out that the cryptocurrency exchange, among other things, blocked accounts that were linked to the platform.

What’s going on with Bitzlato

Users of the segment from the Russian Federation have started complaining about the mass blocking of the crypto-exchange – they previously created a group in Telegram, which was joined by more than a thousand people. Many of them claim that their Binance accounts were blocked without any warning.

Members of the group see a link between the blockades and the US Department of Justice’s action against the cryptocurrency platform Bitzlato. The US Financial Crimes Enforcement Agency (FinCEN) has also listed Binance as a major Bitzlato counterparty to Bitcoin. Well, the owners of the blocked accounts openly admit that they have used Bitzlato in the past.

A group of affected users on Telegram

However, the blocking by Binance supposedly does not have a serious premise – so believes one of the members of the group under the nickname My Shadow. Here’s the relevant rejoinder.

Blocking for bitzlato is nonsense at all. Their guilt hasn’t been proven yet, just an accusation so far, so how can this money be dirty?)

The lack of verification of users and the possibility of buying other people's accounts allows the money to be considered dirty. In such a case, one would not expect the platform to apply anti-money laundering (AML) regulations, so the treatment of such exchangers would predictably be different.

In an interview with Cointelegraph reporters, a Binance spokesperson confirmed that the account blocking does involve Bitzlato. Here’s the comment from a spokesperson for the platform.

Last week, our Bitzlato compliance and investigation team suspended the accounts of some users from several countries, including Eastern Europe and the CIS.

Binance chief executive Changpen Zhao

The spokesman also clarified that the restrictive measures were temporary in nature. He continued.

At the moment, more than 90 per cent of the accounts have been unblocked and users have been notified. All funds are safe. The affected users – fewer than twenty of them – have been provided with the relevant law enforcement contact information.

The exchange also advises to carefully examine possible reasons for the blocking, as some accounts may have been temporarily closed not only because of Bitzlato, but also due to other circumstances. Obviously, using your Binance account for transactions with suspicious platforms is not a good idea. Such a thing could quite predictably lead to account blocking.

Meanwhile, Bitzlato still hasn’t restored its operations. Initially, representatives of the platform promised to recover in 2-3 days, which was followed by a wave of editing and deletion of accounts by the group’s administrators. Users have reacted to this.

Discussion in the Bitzlato Telegram group following the news of Anatoly Legkodimov’s arrest

Representatives of the project then announced new plans: they now promise to get the service back up and running in a fortnight. A similar forecast was announced on 20 January.

While the administrators in the alternative channel continue to claim they are working on restoring the service. Their comments are as follows.

Post by an administrator in the Bitzlato group


We believe that the prospects for the platform are still rather dim. The company promises to restart it and compensate users for their losses. At the same time, it is clear that American regulators are unlikely to approve of the idea of an updated version of Bitzlato and will continue to pay attention to it. In any case we should get answers to the situation soon: at least the stated two week deadline for reopening is coming to an end.
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