The DOJ Announcement Is a Big Nothingburger for the Crypto Industry

  • The U.S. Department of Justice promised big news as it prepared a press conference for noon on Wednesday.
  • The big announcement by the DOJ was the arrest of crypto exchange Bitzlato’s founder.
  • Given Bitzlato’s small size and lack of notoriety, the news is being slammed for making a big deal out of a petty criminal in comparison to other exchanges.
Black handcuffs laid next to Bitcoin on black slate background symbolizing crypto law and crypto-related arrest

The crypto world was abuzz Wednesday morning after the U.S. Department of Justice gave word that it had a big announcement. When first teased, the DOJ called this forthcoming news a “major, international cryptocurrency enforcement action.” What the DOJ announcement turned out to be, though, was nothing worthy of the posturing officials did at the podium.

At noon on Wednesday, representatives from the DOJ descended on a Washington, D.C. conference room to give what many anticipated to be blockbuster news. When news outlets began putting word out that the agency had a major crypto update on the way, crypto prices saw a steep and sudden downturn. Bitcoin (BTC-USD) suffered a dip of almost 5%. Ethereum (ETH-USD) trimmed down by more than 6%.

What prosecutors actually announced in this press conference, though, is far less impressive than any speculation had predicted. The DOJ said that, with the assistance of French law enforcement, it had arrested a man named Anatoly Legkodymov in Miami.

Legkodymov is the founder of a crypto exchange called Bitzlato, whose website has since been overtaken by French investigators. According to the DOJ, Bitzlato has been seized and Legkodymov charged for facilitating transactions between criminals. Specifically, the DOJ has connected Bitzlato to transactions across the now-defunct darknet marketplace Hydra. Investigators also note that Legkodymov is a Russian national who was living in China at the time of his arrest.

For all of the pomp and circumstance the DOJ is taking to this news, though, it’s a bit of a small fry in comparison to investors’ expectations.

DOJ Announcement Unsatisfactory Among Crypto Fans Looking for Big News

“Today marks the elimination of the Hydra-Bitzlato cryptocrime axis.” That’s what Deputy Attorney General Lisa Monaco said of the arrest in Wednesday’s press conference. This might seem like the DOJ successfully toppled a monolith of crypto crime. But the department is celebrating busting an exchange that’s only the tip of the iceberg.

For all of the DOJ’s back-patting, social media is criticizing the announcement. “I’ve covered crypto for 6 years and have never heard of Bitzlato,” says reporter Frank Chaparro of The Block. Others have pointed out that the exchange has almost no presence on social media, emphasizing its lack of reach and threat when compared to other exchanges like Binance (BNB-USD), which has also been shown to facilitate transactions from Hydra.

These comments mirror the larger sentiment among crypto critics and enthusiasts alike. Bitzlato does not register as an exchange of note and many investors concerned with crypto crime don’t find a small exchange bust very impressive compared to the big promises Monaco made in announcing the DOJ’s National Cryptocurrency Enforcement Team (NCET). Frankly, the announcement comes as a bit of a disappointment.

All in all, this doesn’t seem like a leap forward for the U.S. government. For the last year, regulators and journalists alike have been uncovering stones which warrant at least a closer look from investigators. Reuters’ blockbuster report on Binance’s connection to money laundering is seven months old. It also describes almost the exact same crimes as what Legkodymov and Bitzlato have allegedly committed.

This isn’t a knock on today’s news. It’s refreshing to see the DOJ upping its oversight of the crypto industry. It proves that investigators have the means to track ill-gotten funds and build cases against criminals on the blockchain. However, packaging today’s news like a major announcement is disingenuous. Take the celebration with a grain of salt.

On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Brenden Rearick is a Financial News Writer for InvestorPlace’s Today’s Market team. He mainly covers digital assets and tech stocks, with a focus on crypto regulation and DeFi.

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