News Updates January 18, 2023

1. Bitcoin and Ethereum correct amid Bitzlato takedown, tech layoffs and economic worries

U.S. regulators’ announcement of action against Bitzlato, a softening stock market and a new wave of tech layoffs resulted in an abrupt correction in the crypto market.

Bitcoin price and the wider crypto market corrected as news of coordinated “international cryptocurrency enforcement action” stirred up uncertainty among traders.

Given the number of black swan events and the proliferation of crypto-oriented scams in 2022, most investors expect U.S. and global regulators to eventually lay down a strong hammer on centralized exchanges and other businesses connected with the crypto sector.

At the time of writing, BTC price had dipped to an intraday low at $20,400, and Ether 

ETH $1,544 gave back its daily gains to trade as low as $1,500.

As shown in the charts below, the revelation that Bitzlato had been shuttered and its founder arrested was a lighter blow than expected by the market, and the daily candles reflect a bit of indecision as traders decide whether to reenter the market.

Additional pressure on crypto assets could also be coming from a dim outlook of the U.S. and global economy in 2023 issued by banks attending Davos and the escalating trend of Big Tech companies laying off staff.

Recent headlines from Cointelegraph and CNBC detail Microsoft, Amazon and financial technology companies laying off more than 60,000 employees in the last year; and on Jan. 18, Microsoft announced another wave of layoffs to the tune of 10,000 employees.

2. Bitzlato and its founder face enforcement actions from US authorities

The Department of Justice worked with the Treasury Department and French law enforcement to seize many of Bitzlato's resources, alleging the business facilitated illicit activity.

The United States Department of Justice announced a “major international cryptocurrency enforcement action” against crypto firm Bitzlato and the arrest of its founder Anatoly Legkodymov.

In a Jan. 18 announcement, U.S. Deputy Attorney General Lisa Monaco said authorities had taken enforcement actions against Bizlato in coordination with France, seizing Bitzlato’s website and labeling the business as a “primary money laundering concern” connected to Russian illicit finance. According to Monaco, the Department of Justice worked with the Treasury Department and French law enforcement to take action against Bitzlato for allegedly “conducting a money transmitting business that transported and transmitted illicit funds and that failed to meet U.S. regulatory safeguards."

As part of the case against Bitzlato, FBI officials arrested Legkodymov, a Russian national based in China, on Jan. 17 in Miami. He is scheduled to be arraigned in the U.S. District Court for the Southern District of Florida.

U.S. authorities said the criminal complaint against Bitzlato was based on the firm being a “crucial financial resource” for the Hydra darknet marketplace, allowing users to launder funds including those from ransomware attacks:

“Hydra Market users exchanged more than $700 million in cryptocurrency with Bitzlato, either directly or through intermediaries, until Hydra Market was shuttered by U.S. and German law enforcement in April 2022. Bitzlato also received more than $15 million in ransomware proceeds.”

3. Suspects in UK Bitcoin Fraud Had ‘More Money Than They Could Spend’: Lancashire Police
Reports say the group made off with so much money that the leader of the Bitcoin fraud bought cars for people that they met at the bar.

Bitcoin one of the most popular cryptocurrencies among British citizens. Image: Shutterstock. 

Suspects in UK Bitcoin Fraud Had ‘More Money Than They Could Spend’: Lancashire Police.

Four people based in the English county of Lancashire were sentenced on Friday for conducting a scheme worth over $24 million involving a glitch in an unnamed Australian crypto exchange. 

The group reportedly stole over $24 million over a three-month period in 2017, based on the price of 445 Bitcoin at the time they were seized by authorities.

The group reportedly made so much money from the fraud that the ringleader allegedly bought cars for people he met in the pub with the illicit funds.

The Lancashire Police force responsible for the prosecution said they “worked closely” with international law enforcement in regions such as Australia and Finland on the case, along with the UK’s Crown Prosecution Service.

The group was convicted last year and sentenced last Friday for a variety of offenses including converting criminal property and conspiracy to commit fraud. 

James Parker, the group’s alleged leader died in 2021 and therefore did not live to be sentenced. 

Detective Sergent David Wainwright, of Lancashire Police’s Fraud Unit, said that “the scale of the fraud, in this case, is absolutely staggering and led to the suspects literally having more money than they could spend.”

One of the sentenced, Stephen Boys, told the court he used £1 million ($1.23 million) cash stored in a suitcase “to buy a villa from Russians he met in the back office of an estate agent” and that he paid £60,000 ($74,000) to help launder the stolen funds by making payments to officials in an unnamed country. 

4. Sao Paolo Court Ruled Against Binance in User Withdrawal Related Case.

A court in Sao Paolo, Brazil, ruled against Binance in a case in which the leading cryptocurrency exchange faced a withdrawal-related complaint. A user, who introduced a lawsuit against the exchange because he couldn’t retrieve his funds from the platform, received almost $2,000 in damages and the funds deposited as part of the court decision in September.

Binance Loses Lawsuit in Sao Paolo

Local courts have begun to deal with cryptocurrency exchange-related cases in Brazil. Binance, one of the biggest cryptocurrency exchanges in the market, lost a case derived from the inability of processing withdrawals for a customer in Sao Paolo in September.

According to recent reports, the customer who filed the complaint alleged the exchange was not able to process a withdrawal of almost $14,500 during a period in which Binance had suspended direct deposits and withdrawals in the country. The customer affected told the court that the funds would be used to pay for health expenses.

The court ruled in favor of the customer, ordering the exchange to execute the pending withdrawals, and awarding almost $2,000 in moral damages. Judge Rafael Almeida Moreira de Souza, who was in charge of the case, stated:

Values ​​are essential for the survival, with dignity, of the applicant. Reparation for moral damages should serve to compensate the victim and also punish the offender, so that similar conduct does not occur again.

Metropoles, a local newspaper, reported about another similar case that was resolved in Dec. 2021, when a judge ordered an exchange to allow a customer to withdraw funds blocked due to their alleged relationship with a hacking attack.

Scuffle With Capitual

The case is the consequence of measures Binance had to take in June when Capitual, the payments provider of the exchange in Brazil, ceased to process Binance orders. The company updated its platform to comply with the requirements that the Central Bank of Brazil implemented to allow third parties to transact on its PIX payments network.

The situation led Binance to announce it would take legal action against Capitual for this service suspension. At the time, Capitual, which also served other exchanges in the country, explained that Binance failed to adapt its tech platform to comply with the new legal requirements.

The suspension, which lasted for over a week, ended with the inclusion of a new temporary payments partner, called Latam Gateway, while Binance was exploring the possibility of acquiring Sim;paul Investimentos, a Brazilian-regulated brokerage company.

5. Are we still mad at MetaMask and ConsenSys for snooping on us?

ConsenSys, the developer behind MetaMask, isn’t the only one snooping on our transactions, but they’ve taken the most heat for it.

The cryptocurrency community has a tendency to fixate on a new issue every few weeks and then promptly forget about it. The limited attention span of this community misses the ultimate resolution of important issues. Over the Thanksgiving holiday in November 2022, ConsenSys released a disclosure about a privacy policy affecting MetaMask users that sent “Crypto Twitter” into a firestorm. My first reaction was also negative.

MetaMask