Binance exchange has temporarily suspended several accounts linked to Bitzlato transactions after the latter exchange got entangled in regulations. Most of these accounts reportedly belong to Russians who formed a Telegram channel to deal with the issues.
Crypto exchange Bitzlato has been under investigation by the United States Department of Justice (DoJ). The watchdog has unveiled some incriminating facts regarding money laundering activities on the platform. Subsequently, the US DoJ charged the crypto exchange’s founder and majority owner for unlicensed money transfers.
Some huge transactions from Bitzlato used Binance as their landing custody after trying to conceal the source of the illicit funds. Hence, Binance has been closing some accounts on its platform related to Bitzlato’s probe into money laundering, as noted by some users.
Following the account blocks on Binance, some Russian-speaking customers complained on Telegram. The users created a Telegram group chat on January 18 to complain about their inability to withdraw funds from their accounts on the exchange platform. They noted that Binance implemented the measure without warning users.
Over 1,000 users are affected by the measure. The users believe their accounts were blocked due to the recent US Department of Justice enforcement action against Bitzlato.
Some users have been expressing confusion and outrage regarding the action against this crypto exchange. However, most members have confirmed using Bitzlato and Binance accounts to complete some transactions.
One of the chat users stated that it makes no sense to close accounts related to Bitzlato. He noted that “unless proven guilty, actions should not be taken based on mere accusations,” as in the case of Bitzlato. Other members of the group chat classified the measure as “unlawful.”
“At the moment, more than 90% of the accounts have been unlocked, users have been notified about this. All funds are safe. Affected users — less than 20 — have been provided with relevant law enforcement contact information.”
The crypto exchange also advised users to have a look at Binance’s article on multiple reasons why their Binance account might be blocked and what to do in such a situation.
As previously reported, Bitzlato was a little-known cryptocurrency service allowing users to trade crypto via an exchange and peer-to-peer services. The platform is known to maintain significant operations in Russia, allegedly operating from the Federation Tower skyscraper in Moscow.
According to allegations by the U.S. government, Bitzlato ran its operations without proper Know Your Customer procedures, which helped it become a “a haven for criminal proceeds and funds intended for use in criminal activity.”
Many chat members have openly admitted that they used Bitzlato, including incoming and outgoing transactions between Bitzlato and Binance accounts. Some affected users also expressed outrage and confusion about the action against Bitzlato.
“Though I haven’t been banned anywhere yet, I just lost some on BTC-e, Wex, now it’s Bitzlato, but I consider these bans to be lawlessness,” one chat member wrote. “Blockages in relation to Bitzlato are nonsense. They haven’t been proven guilty so far as there are only accusations, so how can this money be dirty?” another user asked.
A spokesperson for Binance said that the recent suspensions were indeed connected to Bitzlato. “Last week, our compliance and investigations team, in relation to the Bitzlato case, suspended some users’ accounts from several countries including in Eastern Europe and the CIS,” the representative stated.