After Bitzlato, is everyone blaming the U.S. DOJ—and rightly so?
U.S. justice dismantles a little-known Russian exchange: Bitzlato.
U.S. Justice is taking down a Russian exchange no one has heard of: Bitzlato. The crypto community on Twitter is mocking the situation. But the move could just be the beginning.
Lisa Monaco, the U.S. Deputy Attorney General, announces the crackdown on Bitzlato. The Department of Justice announced on Wednesday, January 18, 2023, a "large international action to prosecute cryptocurrencies." It sparked a wave of speculation on crypto Twitter: Are stablecoins going to be banned? Tighter regulation? Could it be about Binance? Reuters says the SEC has been investigating money laundering for months. A shakeup in the crypto market is expected. Bitcoin price falls for the first time after the first positive weekly rally in months.
The announcement came at 6:00 p.m. Dutch time—and the reception: ridicule and memes.
Anatoly Legkodymov, the founder of the China-based Russian crypto exchange Bitzlato, has been arrested in Miami. He is alleged to have laundered more than $700 million, much of it on the Russian dark web via the Hydra trading platform. Assets are seized and the site is taken offline. Deputy Attorney General Lisa Monaco of the U.S. Department of Justice said: "Today the Department of Justice delivered a major blow to the crypto-crime ecosystem." Crypto Twitter sees it differently.
Ridicule and memes for Bitzlato
Crypto consultant View post on X: "I;ve been in this industry since 2013, and I;ve never heard of it." The well-known Web3 skeptic Molly White also weighed in, posting View post on X to announce her joy. Ryan Selkis, founder of Messari, one of the largest crypto data platforms, View post on X: "Bitzlato lol. Our tax dollars are being wasted." A popular meme circulating on social media about the case also shows how little the crypto scene is impressed by this crackdown. It depicts Bitzlato as a feather aimed at a soldier while knives and rockets labeled BlockFi, Voyager, Celsius and FTX rain down on a sleeping citizen:
"A low-hanging fruit that;s marketed as a big catch. That;s not it," Joseph Collement, general counsel at Bitcoin.com, told The Block. "The real crime is the DOJ not protecting Americans from FTX, Voyager, 3AC, Genesis and the many other failed centralized exchanges."
Bitzlato is likely just the beginning
But a closer look shows this campaign isn;t as small as it seemed. The platform laundered about $700 million, much of it tied to sanctioned Russian entities and "well-known scammers," according to the U.S. justice department. "About two-thirds of Bitzlato;s major receiving and sending counterparties are associated with dark web markets or fraud," the judge said. Of particular note: One of the largest bitcoin recipients via Bitzlato was Binance. The hit to the exchange will likely shed light on other consequences.
And it could be the start of much bigger claims. That;s how Van Cleef, chief advisor at the Luminous Group, sees it. "Disappointed in Bitzlato? Not necessarily. A much bigger message was sent — a blueprint for future actions, maybe even the actions everyone expected today."
The U.S. Department of Justice also stated that this is "just the beginning" in cracking down on crypto firms involved in money laundering and other crime.
