Part of the Bitzlato co-founder’s Dec. 12 guilty plea required the dismantling of the illegal exchange and the forfeiture of its cryptocurrencies. Now, it is suspending withdrawals.
Just weeks after the Bitzlato co-founder agreed in a Brooklyn court to dissolve the cryptocurrency exchange as part of a guilty plea, the Bitzlato team announced that it had to “temporarily suspend” all Bitcoin withdrawals.
The company claimed in a Dec. 12 post on its Telegram channel that this was only a temporary measure while it prepares for and attends upcoming legal hearings regarding user assets it has seized in France.
"We are determined and optimistic about this matter," it said.
However, on Dec. 12, Bitzlato’s former CEO Anatoly Legkodymov agreed to dissolve Bitzlato and forfeit $6 million in cryptocurrency as part of a guilty plea to one count of operating an unlicensed money services business.
In January, the founder was arrested in Miami as part of a joint crackdown by the U.S. Justice Department, Treasury Department and French law enforcement, and much of the company’s infrastructure, including its website, was seized.
Despite the seizure of the exchange and its assets, Bitzlato was able to partially restore access to user funds in March, allowing users to withdraw 3% of their assets on the platform via a Telegram bot.
The company continued to increase the amount users could withdraw in the following months, reaching 11% in November.
U.S. Attorney Breon Peace accused the cryptocurrency exchange of being used as an “open turnstile for criminals,” while the Justice Department claimed it was a “significant financial resource” for the Hydra darknet marketplace, allowing users to launder money, including funds from ransomware attacks.