In a press conference Wednesday, U.S. authorities targeted crypto exchange Bitzlato Ltd. with accusations of money laundering and arrested its founder, Anatoly Legkodemov, in Miami. The Treasury Department designated Bitzlato for allegedly laundering illegal money for ransomware actors in Russia.
Bitzlato is a Hong Kong-based crypto exchange that operates globally. Exchange hosted wallets for criminals’ illegal buying and selling and offered peer-to-peer services. The company was involved in illegal direct and indirect transfers of $700 million over the past few years, according to Justice Department officials.
Officials said the criminal charges against Bitzlato are based on the fact that the company was a source of funding for the Hydra darknet marketplace.
The Justice Department added:
“Hydra Market users exchanged more than $700 million in cryptocurrency with Bitzlato, either directly or through intermediaries, until Hydra Market was shuttered by U.S. and German law enforcement in April 2022. Bitzlato also received more than $15 million in ransomware proceeds.”
U.S. Deputy Attorney General Lisa Monaco said in a Jan.18 statement that authorities, in coordination with France, took enforcement action against Bitzlato. They seized Bitzlato’s website and labelled the exchange a “primary money laundering concern” linked to illicit Russian finance.
Treasury deputy secretary Wally Adeyemo said the label effectively marks the Bitzlato as “an international pariah”.
As well as, Bitzlato did not have an effective user identification process to verify the customer’s identity as required by anti-money laundering laws. The crypto platform advertised itself to clients by saying that “neither selfies nor passports [are] required.”
Bitzlato has also done heavy business with U.S. customers, despite claims that it does not accept U.S. users.
Monaco described a coordinated enforcement effort involving the U.S. Treasury Department, the French authorities and the Federal Bureau of Investigation. They had disrupted a busy corner of this criminal activity.
Lisa Monaco stated:
“These actions show not only the broad scope of the defendant’s alleged crimes but also the international net dropped by law enforcement to stop him and his business partners.”
According to Chainalysis, which tracks crypto transactions, Bitzlato has facilitated approximately $1 billion in crypto laundering since 2019.
Bitzlato’s Founder Arrest
As part of the case against Bitzlato, FBI officials arrested its founder, Anatoly Legkodimov, overnight in Miami on January 17. Mr Legkodemov, a 40-year-old Russian citizen who lives in China, Schengen and Russia, was due to appear in court Wednesday afternoon in Florida federal court.
If convicted, Legkodimov could face a maximum sentence of five years in prison.
Referring to the December arrest of Sam Bankman Fried, the former CEO of cryptocurrency exchange FTX, she said:
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.
After the bankruptcy of FTX in November, Sam Bankman Fried was arrested for defrauding investors. Meanwhile, he has pleaded not guilty to criminal charges. Although former colleagues such as Alameda CEO Carolyn Ellison and FTX co-founder Gary Wang have pleaded guilty to federal charges.