Seized exchange Bitzlato allows users to withdraw 50% of Bitcoin

Russian-affiliated cryptocurrency exchange Bitzlato has managed to partially restore access to user funds despite being officially seized by European authorities.

Bitzlato has enabled users to withdraw up to 50% of assets stuck on the platform due to US and Europol enforcement, the firm announced on its Telegram channel on March 20.

According to the statement, Bitzlato users can now recover half of their assets using the Telegram bot @bz_phoenix_bot, which allows users to move assets from their Bitzlato online account to an external wallet or an exchange.

All withdrawals from Bitzlato are processed in Bitcoin (BTC) as the platform converted all altcoin holdings of users to BTC at the time the service was stopped on January 18. According to the firm, Bitzlato had to convert user balances to Bitcoin due to technical difficulties associated with servicing multiple altcoins after Bitzlato was seized.

In a public Bitzlato chat, a number of purported Bitzlato users said they were able to move out Bitcoin to exchanges such as ByBit and Binance. Some alleged Bitzlato clients are also said to have used software wallets such as Trust Wallet and ViaBtc, as well as hardware wallets such as Ledger to withdraw Bitcoin.

Bitzlato’s 50% withdrawal option follows the previously announced roadmap to restore users’ access to the platform and resume operations. According to the plan, Bitzlato will continue the work to restore the platform and aims to provide a peer-to-peer (P2P) cryptocurrency trading service by the beginning of April 2023.

A number of users have preferred not to withdraw 50% of their assets from Bitzlato this time, opting to wait until the exchange will restore P2P trading. Once the P2P platform is restored, users will be able to access all features that were previously available, a Bitzlato spokesperson told Cointelegraph.

Bitzlato users should not expect to get back the remaining 50% of their holdings once the P2P exchange is launched, the representative said.

“There will not be a second half when P2P is opened, as these are two unrelated issues and processes,” the Bitzlato spokesperson stated.

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According to the representative, the problem with client funds has not yet been resolved, but Bitzlato plans to return the money either by restoring access to funds seized by Europol or from the company’s own funds. That’s what the spokesman said.

“Lawyers have challenged the decision of the French government and if the outcome is favorable, the funds will be returned […] If it doesn’t work, users have to wait until the company earns enough to compensate for the losses.”

As previously reported, the US Department of Justice announced a major international crypto enforcement action against Bitzlato in mid-January. Europol later reported that European authorities seized more than $19 million in crypto from Bitzlato as part of the enforcement actions.