Crypto Exchange Bitzlato Suspends Withdrawals Weeks after Its Co-Founder Pleads Guilty

Cryptocurrency exchange Bitzlato, which has been involved in a significant money laundering case, announced on Wednesday (December 27) that it had suspended withdrawal services, weeks after its co-founder pleaded guilty.

Bitzlato posted on Telegram: "At the moment, we are faced with the need to suspend special balance withdrawals and technical support. This is a temporary measure to prepare for and go through the upcoming court hearings regarding the seizure of user assets in France. We are determined and optimistic about this issue."

It further stated: "2023 was not an easy year in the history of our company: news, uncertainty, worries, hopes. All these are faithful companions of the Bitzlato team. But despite this, we were able to close 70% of the balance that we had at the time the service was stopped."

Bitzlato is a Hong Kong-based crypto exchange. At the beginning of this year, the U.S. Department of Justice, the Treasury Department, and French law enforcement launched a joint crackdown​ against the exchange, arresting its Russian founder Anatoly Legkodymov in Miami and seizing most of Bitzlato's infrastructure, including its website.

According to court documents at the time, Bitzlato's deficient KYC procedures make it a haven for criminal proceeds and funds intended for use in criminal activity. Bitzlato's largest counterparty in cryptocurrency transactions was Hydra Market, an anonymous, illicit online marketplace for narcotics, stolen financial information, fraudulent identification documents, and money laundering services that was the largest and longest running darknet market in the world. 

Hydra Market users exchanged more than $700 million in cryptocurrency with Bitzlato, either directly or through intermediaries, until Hydra Market was shuttered by U.S. and German law enforcement in April 2022. 

Bitzlato also received more than $15 million in ransomware proceeds.

French authorities blocked the crypto exchange's website on the day its founder was arrested. In addition, authorities in Spain, Portugal, Cyprus, and Europol, the European Union's law enforcement cooperation agency, also cooperated in the crackdown against Bitzlato.

On December 6, Bitzlato co-founder and former CEO, Legkodymov, agreed to dissolve Bitzlato and forfeit $23 million in cryptocurrency as part of a guilty plea to one count of operating an unlicensed money services business.