False alarm over Binance charges causes prices to drop, crypto Twitter laughs it off

Therefore, when the DOJ announced its “major, international cryptocurrency enforcement action” most people assumed it was Binance. It seems even Changpeng Zhao (CZ), the co-founder and CEO of Binance, felt the announcement was targeted at him and his exchange. This is because, a short while after the DOJ statement, CZ issued a cryptic tweet asking people to stay calm in the face of FUD and fake news.

“Will try to keep 2023 simple. Spend more time on less things. Do's and Don'ts. 1. Education 2. Compliance 3. Product & Service 4. Ignore FUD, fake news, attacks, etc. In the future, would appreciate it if you can link to this post,” CZ wrote, perhaps referring to the DOJ’s statement as the FUD.

The news also spooked investors, who began to withdraw their crypto funds from Binance. This resulted in nearly $60 million in net outflows in the hours following the DOJ statement, as per data from Nansen.

However, all this FUD turned out to be unnecessary. This is because the firm at the centre of the DOJ’s “international cryptocurrency enforcement action” turned out to be a little-known crypto exchange called Bitzlato. The exchange came under the scanner after it failed to meet the required money laundering statutes.

As per the DOJ’s statement, the exchange has overseen more than $700 million in transactions, most of which originated from the dark web marketplace Hydra. Shortly after the announcement, the founder of the Hong Kong-based exchange, Anatoly Legkodymov, was arrested in Miami.

Processing such volumes without adhering to AML requirements could see Legkodymov hit with 5 years of prison time if convicted.

However, what’s strange is that Bitzlato is by no means a major international player. Even at its peak, the exchange has never had more than $6 million worth of assets under its management. This is a mere speck compared to Binance’s holdings, which are easily worth billions of dollars.

Therefore, after breathing a massive sigh of relief, the cryptoverse was quick to poke fun at the DOJ’s “major international action” announcement. Crypto Twitter was rife with memes and jokes on the matter. “If I had $1 for every Bitzlato meme posted in the past 30 mins, I would have more money than Bitzlato,” one user wrote. “Huge opportunity emerging for exchanges to capture all that massive Bitzlato volume now,” said another user with much sarcasm.

However, jokes apart, the announcement did upset the market. Just when the crypto industry was beginning to see an uptick, this ill-timed announcement caused an unwanted setback. After two or three weeks of continued gains, most coins are now in the red over the last 24 hours. And there is no telling how long the market will take to recover from this setback.