Anton Shkurenko, founder of the Russian password exchange Bitzlato, was shut down by the US Department of Justice (DoJ) in January, refuting money laundering charges by US and EU authorities.

He spoke to WJB after the Russian news media Shkurenko was arrested in Moscow on Monday. He said that he was stopped by the police to check his true identity and was released after communication. Although he declined to reveal which law enforcement agency detained him, he said that he had signed an obligation to appear in court at the standard of the investigator and received an arrest warrant for strict detention to prevent further arrest.

Shkurenko said that the police detained him because she was on the Interpol wanted list, but he was not aware of any ongoing criminal cases involving it in Russia. "otherwise, I wouldn't be talking to you now," she said at the Zoom conference, as he sat on an apartment building wall that looked like it was decorated with patterned wallpaper.

"I want to convince the prosecutor that I am innocent," he said, adding that he could not reveal the small details of the ongoing investigation. Bitzlato was shut down last month after cross-jurisdictional investigations by several US and European departments, which revealed a link between the then unknown exchange and Hydra, the market for dark web sales.

Shkurenko said the man was a "technical engineer" at Bitzlato, but clearly a man with a lot of power: he used to be one of the key holders of the exchange's password wallet. She told WJB that he is said to have handed control of the wallet to the rest of the team.

As for Bitzlato and the settlement of more than $700m in illegal funds charges, Shkurenko showed that the exchange made every effort to disconnect the suspects and was "not ashamed" of its work, according to the government. The US Treasury's Financial Crime Inspection Internet (FinCEN) has listed the exchange as "the main money laundering problem", a powerful concrete measure often used to disconnect a company from the global financial system.

Shkurenko said Bitzlato only uses passwords to buy and sell "bulletin boards". In an earlier interview with Russia's YouTube channel, Shkurenko stated that Bitzlato does not have a bank account and that all proceeds are encrypted.

Even before the enforcement action in January, Bitzlato began to move its infrastructure from Europe to Russia, and now most of its user money is under the control of the team, he said. According to Shkurenko, Bitzlato prepares to release again in advance and gradually returns users who have suffered losses due to the shutdown of law enforcement agencies.

See also:Binance is designated as the counterparty in FinCEN's order for Bitzlato.

It doesn't take much hard work, he said. "I can publish this service in my apartment." Two small servers will be enough.

Arrests around the world

Bitzlato, a Russian founder exchange registered in Hong Kong, has been operating since 2016 and went bankrupt in January this year, when the Justice Department and FinCEN signed cooperation representatives arrested the founder Anatoly Legkodymov in Miami and accused him of transferring money without consent.

At about the same time, the European police arrested four people suspected of being linked to Bitzlato in Europe and cracked an escrow exchange hot wallet server at a big data center in France. As a result, the government took 18 million euros worth of passwords-35 per cent of Bitzlato users' money, Shkurenko said. European governments have also frozen more than 100 accounts in other Bitzlato-related cryptographic exchanges, escrowing assets worth 32 million euros.

According to the US Department of Justice, Hydra, one of Bitzlato's biggest counterparties, has been severely punished for the sale of dark web sites that have been suspended. It also received more than $15 million in extortion profits from the virus and was linked to Russia's Ponzi scheme "TheFiniko". According to the European police agency, 46 per cent of all passwords according to Bitzlatow are related to illegal activities, worth about 1 billion pounds. According to Europol, details from Bitzlato's comprehensive 3500 bitcoin addresses and more than 1000 users "show contact with a variety of criminal cases reported in the structure of the European police organization."

In an interview with YouTube's German data encryption channel Satoshkin Live on January 31st, Shkurenko confirmed that the four people arrested in Europe in January were former CEO Mikhail Lunev, sales director Alexander Goncharenko, and Constantine (unidentified), design and development operations engineer at Pavel Lerner, the contractor. The first three are still in custody and Constantine has been released on parole and is now in Estonia.

Legkodymov is still detained abroad.

Dirty data encryption

The US Department of Justice and the European police show that the flow of illegal and criminal assets is better than the result of Zlatow's lax response to KYC (mastery of your customers) and AML (compliance management). Shkurenko claims that since July 2021, Bitzlato has been applying the "AML service project" in accordance with the EU national agreement, which will identify abnormal transactions and trigger the company's research.

Shkurenko declined to reveal the exact names of the goods analyzed by the blockchain technology used by Bitzlato, saying she did not want to create problems for service providers.

Shkurenko also claims that Bitzlato often requests clarification from law enforcement agencies, including fbi of the United States. When asked if he remembers the conclusion of this communication, he said he did not check it. Overall, Shkurenko says, Bitzlato's approach is to assume that all users are innocent until they are proved to have broken the law.

How should I react when someone standing in front of me gives me money until some people explicitly file a criminal complaint against her? He said. For Bitzlatow, the obvious answer is: do nothing.

In addition, he pointed out that the team actively found hidden crimes using the exchange, and even often visited the Hydra website sales market to retrieve Bitzlato users. Once discovered, such accounts will be blocked, he said. Shkurenko recalls that once, on the way to the office, a service support worker saw an advertisement for an illegal drugstore, painted on a guardrail-after investigation, it turned out to be a Bitzlato user. The exchange blocked the account, he said.

According to US court documents in the Legkodymov case, although Bitzlato sometimes blocks or terminates transactions with Hydra or users suspected of drug dealers in a variety of ways, its employees sometimes assist users in trading transactions with Hydra, and sometimes neither of them takes any action.

An old exchange

Legkodymov and Shkurenko, former colleagues of Rostelecom, a Russian state-owned communications service provider, left to start other businesses. One insistence is a joint password mining company called A-XBT, which operates a mine in Russia, China and Abkhazia, a separate region of Slovenia with divergent international competitiveness.

According to the Russian companies Registry, A-XBT earned just over $1 million in 2021. But Shkurenko said the company suspended operations a year later after Russian law enforcement agencies mentioned the criminal procedure law to users of the West Siberian data center. A-XBT is in charge of its ASIC mining machine in western Siberia. After that, he added, Shkurenko and Legkodymov felt that the project did not justify his diligence.

Shkurenko said that the idea of setting up a password exchange in 2016 comes from the experience of operating mining plants in each place. The partners realized that they didn't have a quick and convenient way to trade virtual currencies, so they created a message conversation robot called BTC Banker to advise password merchants and customers-which later became Bitzlato.

Today, Bitzlato has more than 100 employees, says Shkurenko.

Bitzlato is not the first Russian exchange to be hit by laws and regulations on suspicion of lax KYC and AML procedures. In October 2021, OFAC approved SUEX, an over-the-counter trading firm based in Moscow that handles many passwords related to fraud, drug use and extortion viruses. Not long after that, the agency approved Chatex, a SUEX-related wallet trading service based on the password of a message.

See also:Cancelled Crypto Exchange Bitzlato says the plan resumes operation

In April 2022, the US Treasury approved Garantex, another Russian-sourced exchange. All four exchanges-SUEX, Chatex, Garantex and Bitzlato--also use Binance as the main source of liquidity. Binance indicated earlier that he froze his SuEX and Garantex accounts even before OFAC granted them permission.