WASHINGTON, DC – JANUARY 18: Deputy Attorney General Lisa O. Monaco gives remarks at a news … [+]
The United States Justice Department announced on Wednesday it charged the founder and majority owner of Hong Kong-registered exchange Bitzlato with unlicensed money transmitting as the exchange facilitated over $700 million worth of illicit funds.
Anatoly Legkodymov was arrested in Miami last night following a “years-long” joint investigation by the department of justice, the Treasury Department’s Financial Crimes Enforcement Network and French authorities, according to a press release.
“As alleged, Bitzlato sold itself to criminals as a no-questions-asked cryptocurrency exchange, and reaped hundreds of millions of dollars’ worth of deposits as a result,” U.S. Attorney Breon Peace said.
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The Hong Kong-registered exchange marketed itself as a peer-to-peer custodial crypto exchange that allowed customers to exchange and trade 60 supported cryptocurrencies, including bitcoin, ethereum, bitcoin cash and the monolith ruble, with “no middle-man.” The charges allege that the exchange required only minimal identification from users, with “neither selfies nor passports” required.
In doing so, the exchange became a safe-haven for criminals looking to store their cryptocurrency with few, if any, know-your-customer (KYC) procedures. The charges claim that Legkodymov and other Bitzlato managers were aware of the presence of illicit activity within the exchange, citing an instance on May 29, 2019 were Legkodymov wrote in Bitzlato’s internal chat system that the exchange’s users were “known to be crooks.”
Their biggest counterpart, the charges allege, was the Hydra Market, a Russian dark-web used for the sale of illegal drugs, stolen financial information and money laundering services. Hydra Market users used Bitzlato until the market’s seizure by authorities in April 2022.
The announcement of Bitzlato’s seizure provoked mixed reactions within the crypto industry as experts await news regarding more popular crypto cases, including the ongoing charges against FTX founder Sam Bankman-Fried, not the lesser-known exchange.
“I’ve worked in space since 2013. Never heard of it,” partner at Brown and Rudnick and Forbes legal expert Hailey Lennon tweeted.
But the exchange’s connections to Russian groups has been documented since June 2022, when crypto cybersecurity research firm Chainalysis found that Bitzlato had facilitated approximately $1 billion worth of crypto money laundering since 2019.
The report found that Bitzlato had received $206 million from darknet markets, $224.50 million from scams, and at least $9 million from ransomware attackers.
