Bitzlato is yet to resolve the issue with the remaining 50% of user funds and may eventually compensate using its own funds.
Russia-linked cryptocurrency exchange Bitzlato has managed to partly restore access to user funds despite being officially seized by European authorities.
Bitzlato has enabled its users to withdraw up to 50% of assets that were stuck on the platform due to enforcement from the United States and Europol, the firm announced on its Telegram channel on March 20.
According to the statement, Bitzlato users are now able to restore a half of their assets using the Telegram bot @bz_phoenix_bot, which allows users to move assets from the web Bitzlato account to an external wallet or an exchange.
All withdrawals from Bitzlato are processed in Bitcoin (BTC) as the platform converted all altcoin holdings by users into BTC at the time the service was halted on Jan. 18. According to the firm, Bitzlato had to convert user balances into Bitcoin due to technical difficulties associated with servicing multiple altcoins after Bitzlato was seized.
In a public Bitzlato chat, a number of alleged Bitzlato users said that they were able to move out their Bitcoin to exchanges like ByBit and Binance. Some alleged Bitzlato clients also reportedly used software wallets like Trust Wallet and ViaBtc, as well as hardware wallets like Ledger to withdraw their Bitcoin.
Bitzlato’s 50% withdrawal option follows its previously announced roadmap on restoring users’ access to the platform and resuming operations. According to the plan, Bitzlato will continue its work to restore the platform and aims to provide a service for peer-to-peer (P2P) cryptocurrency trading by early April 2023.
A number of users have preferred to not 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 functions that were previously available, a spokesperson for Bitzlato told Cointelegraph.
Bitzlato users should not expect to recover the remaining 50% of their assets once the P2P exchange is launched, the representative said.
“There will be no second half once the P2P is opened, since these are two unrelated questions and processes,” the Bitzlato spokesperson stated.
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According to the representative, the issue with client funds has not yet been resolved, but Bitzlato plans to return the money either by restoring access to seized funds by Europol or from the company’s own funds. The spokesperson said.
“Lawyers have disputed the decision of the French government, and if the outcome is favorable, the funds will be returned [...] If it does not work out, the users have to wait until the firm earns enough to compensate for the losses.”
As previously reported, the U.S. Department of Justice announced a major international crypto enforcement action against Bitzlato in mid-January. Europol subsequently reported that European authorities seized more than $19 million in crypto from Bitzlato as part of the enforcement actions.
