Bitzlato crypto founder arrested over $700m crimes
An international effort against a Russo-Chinese venture
In a major blow to the cryptocurrency crime landscape, the US Department of Justice (DOJ) has arrested the Russian founder of huge cryptocurrency exchange Bitzlato.
The DoJ accused Anatoly Legkodymov, who now resides in China, of operating a company that handled more than $700 million in illegal transactions and violating laws intended to prevent money laundering.
Mr Legkodymov was arrested in Miami.
"Overnight, the Department worked with key partners here and abroad to disrupt Bitzlato, the China-based money laundering engine that fuelled a high-tech axis of cryptocrime, and to arrest its founder, Russian national Anatoly Legkodymov," said Deputy Attorney General Lisa Monaco.
"Today's actions send the clear message: whether you break our laws from China or Europe - or abuse our financial system from a tropical island - you can expect to answer for your crimes inside a United States courtroom."
Monaco said Bitzlato, a company incorporated in Hong Kong, was a key financial resource for the Hydra dark web market, the biggest and longest-running such marketplace.
Since Bitzlato only required a limited amount of customer identification, it was able to serve as a haven for illegal proceeds and funds intended for use in criminal activities.
The DoJ complaint alleges that the company knew about the problems because it handled 'dirty money' without following customer-screening norms.
Prosecutors alleged Bitzlato had "significant" business with Americans, despite its assertion that the company did not accept US consumers.
The DoJ says Bitzlato's customer service representatives repeatedly told customers they could transfer money from US banking institutions.
Legkodymov, who personally ran Bitzlato from Miami in 2022 and 2023, received reports indicating that a significant amount of traffic was coming to Bitzlato from American IP addresses, with over 250 million such visits in July 2022.
The Financial Crimes Enforcement Network (FinCEN) deemed Bitzlato as a major money laundering concern after authorities found that approximately half of Bitzlato's documented transactions came from illegal Russian funds or other dubious origins.
US officials collaborated with law enforcement in France and other nations on the operation, which took down Bitzlato's digital infrastructure. French authorities then took enforcement measures, in collaboration with Europol and allies in Spain, Portugal and Cyprus.
The DoJ has accused Legkodymov of running an illegal money-transfer business. If convicted, he faces a maximum sentence of five years in jail.
The charges follow the USA's formation of the National Cryptocurrency Enforcement Team (NCET), a DoJ unit tasked with fighting illicit usage of cryptocurrency and recovering the profits of such crimes.
The squad was formed in October 2021 to investigate and prosecute cryptocurrency crimes, create strategies for such investigations, and identify areas to concentrate on like professional money launderers and ransomware scams.
This arrest comes less than a month after the DoJ announced that Sam Bankman-Fried, former CEO of bankrupt cryptocurrency exchange FTX, would be extradited to the US.
Bankman-Fried was staying in the Bahamas and is accused of money laundering and fraud.