FinCEN special measure prohibiting transmittal of funds involving Bitzlato (Russian illicit-finance virtual-currency exchange)

Mechanism

The order invokes FinCEN's special-measure authority under 31 U.S.C. 5323 (Section 9714(a) of the Combating Russian Money Laundering Act, as amended by Section 6106 of the FY 2022 NDAA). This was the first deployment of this Russia-specific special-measure authority; a later action against PM2BTC (October 2024) followed the same legal basis.

The substantive prohibition: a US "covered financial institution" (broadly defined to include banks, broker-dealers, mutual funds, futures commission merchants, introducing brokers, money services businesses, and dealers-in-foreign-exchange) may not transmit funds from, to, or through Bitzlato Limited, or any account or convertible virtual currency (CVC) address administered by or on behalf of Bitzlato.

Bitzlato Limited is a Hong Kong-incorporated entity that operated primarily through Telegram-based peer-to-peer trading. According to FinCEN's designation, it facilitated more than USD 700 million in illicit-related transactions, including funds sent to and from Hydra — one of the world's largest darknet markets — and to sanctioned entities. A substantial share of Bitzlato's counterparties were Russian nationals using it to move proceeds of cybercrime, ransomware, and darknet-market drug trafficking.

Coordinated action context

The 18 January 2023 FinCEN designation was one element of a multi-agency, multinational operation:

• The US Department of Justice unsealed criminal charges against Anatoly

Legkodymov, a Russian national and Bitzlato co-founder residing in China, who was arrested in Miami on the same date;

• Europol and Eurojust coordinated a parallel law-enforcement disruption of

Bitzlato's server infrastructure in Europe.

Deputy Secretary of the Treasury Wally Adeyemo stated the action was part of Treasury's continued effort to ensure the Russian financial system and those who support it cannot use virtual currency to evade US sanctions and AML obligations.

Downstream implications

• Establishes the first operational use of CRMLA Section 9714(a), creating

a template subsequently applied to PM2BTC (October 2024); signals that FinCEN will use this Russia-specific authority for VASP-targeting.

• Compliance teams at US banks and US-nexus VASPs must screen for

Bitzlato-administered wallet addresses as part of their OFAC/BSA obligations.

• Bitzlato's role as a fiat-to-crypto on-ramp for Hydra users illustrates

the operational link between Russian-language darknet markets and sanctions-evasion VASPs — a channel the US and EU have targeted progressively since the April 2022 Hydra takedown.

Open questions

• Whether any portion of Bitzlato's remaining CVC holdings was ultimately

seized or forfeited as part of the DOJ criminal proceeding.

• Whether EU or UK authorities issued parallel VASP prohibitions following

the coordinated infrastructure takedown.