The exchange’s founders face charges of running an unlicensed money services company
Only weeks after its co-founder arranged to disband the crypto exchange as part of his guilty plea in a Brooklyn court, Bitzlato announced it must “temporarily suspend” all Bitcoin withdrawals.
In a December 27 post on its Telegram channel, the firm asserted this is only a temporary action while it readies for upcoming legal proceedings concerning its French customers’ assets that were seized.
“We are full of determination and optimism regarding this matter,” read the post.
Former Bitzlato CEO Anatoly Legkodymov agreed to dissolve the company and forfeit $23 million in cryptocurrency as part of his December 6 guilty plea to one count of running an unlicensed money services firm.
Legkodymov was arrested in Miami in January 2023 as part of a joint investigation by the US Department of Justice, the US Treasury Department and French authorities. This resulted in the seizure of most of the firm’s infrastructure, including its web platform.
While the exchange’s assets were seized, Bitzlato partially restored user access to funds last March, allowing customers to withdraw 50% of their assets on the platform using a Telegram bot.
Bitzlato resumed increasing the amount available for withdrawals over the next several months, eventually allowing them to withdraw as much as 70% of their funds in November.
US Attorney Breon Peace stated that Bitzlato was being used as an “open turnstile by criminals.” At the same time, the DOJ says the firm was a “crucial financial resource” for the Hydra dark web marketplace, where users are permitted to launder illegal funds, including those gained from cyber attacks.
