The founder and majority owner of a cryptocurrency exchange, Bitzlato Ltd. (Bitzlato), was arrested last night in Miami for his alleged operation of a money transmission business that carried and transmitted illicit funds and failed to comply with US regulatory safeguards. Money laundering requirements.
Anatoly Legkodymov, 40, a Russian citizen residing in Shenzhen, People's Republic of China, is scheduled to arraign this afternoon in the US District Court for the Southern District of Florida. French authorities and the US Treasury Department's Financial Crimes Enforcement Network (FinCEN) are taking simultaneous enforcement action.
โToday, the Department of Justice dealt a significant blow to the cryptocrime ecosystem,โ said Assistant Attorney General Lisa O. Monaco. โOvernight, the Department worked with key partners here and abroad to disrupt Bitzlato, the China-based money laundering engine that powered a high-tech cryptocrime hub, and to arrest its founder, Russian citizen Anatoly Legkodymov. Today's actions send a 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 in a United States court."
โAs alleged, the defendant helped operate a cryptocurrency exchange that failed to implement required anti-money laundering safeguards and allowed criminals to profit from their misdeeds, including ransomware and drug trafficking,โ the attorney general said. Deputy Kenneth A. Polite, Jr. of the Criminal Division of the Department of Justice. โThe tremendous efforts of the National Crypto Enforcement Team to disrupt Bitzlato and arrest the defendant demonstrate that we will continue to work with our partners, both foreign and domestic, to combat cryptocurrency-driven crime, even as it transcends international borders.โ
According to court documents, Legkodymov is a senior executive and the majority shareholder of Bitzlato, a Hong Kong-registered cryptocurrency exchange that operates globally. Bitzlato has promoted itself as requiring minimal identification from its users, specifying that "no selfies or passports [are] required." At times, when Bitzlato prompted users to submit identifying information, it repeatedly allowed them to provide information pertaining to "straw man" registrants.
โCryptocurrency trading institutions are not above the law and their owners are not beyond our reach,โ said United States Attorney Breon Peace for the Eastern District of New York. โAs alleged, Bitzlato sold itself to criminals as a cryptocurrency exchange with no questions asked and obtained hundreds of millions of dollars worth of deposits as a result. The defendant is now paying the price for the malign role his company played in the cryptocurrency ecosystem.โ
As a result of these poor know-your-customer (KYC) procedures, Bitzlato allegedly became a haven for criminal proceeds and funds earmarked for criminal activity. Bitzlato's largest counterparty in cryptocurrency transactions was Hydra Market (Hydra), an anonymous and illicit online marketplace for narcotics, stolen financial information, fraudulent identification documents, and money laundering services that was the largest darknet marketplace and longest running in the world. Hydra users traded over $700 million worth of cryptocurrency with Bitzlato, either directly or through intermediaries, until Hydra was shut down by US and German law enforcement in April 2022. Bitzlato also received over $15 million in ransomware profits.
โThe FBI will continue to pursue actors who attempt to mask their criminal activity behind keyboards and use means such as cryptocurrency to evade law enforcement,โ said FBI Deputy Assistant Director Brian Turner. โWe, along with our federal and international partners, will work tirelessly to disrupt and dismantle these types of criminal enterprises. Today's arrest should serve as a reminder that the FBI will impose risks and consequences on those who engage in these activities."
"As alleged today, Legkodymov knowingly allowed Bitzlato to become a perceived safe haven for funds used and resulting from a variety of criminal activities," said Deputy Director in Charge Michael J. Driscoll of the FBI's New York field office. York. โThe FBI and our partners remain steadfast in our commitment to keep cryptocurrency markets, like any financial market, free of illicit activity. Today's action should serve as an example of this commitment, as Legkodymov will now face the consequences of his actions in our criminal justice system."
As alleged in the complaint, Bitzlato's customers routinely used the company's customer service portal to request support for transactions with Hydra, which Bitzlato often provided, and admitted in chats with Bitzlato staff that they were trading identities. supposed. Furthermore, Legkodymov and the other Bitzlato managers knew that Bitzlato's accounts were riddled with illicit activity and that many of its users were registered under the identities of others. For example, on May 29, 2019, Legkodymov used Bitzlato's internal chat system to write to a colleague that Bitzlato users were "known criminals" and used the identity documents of others to register their accounts. Colleagues repeatedly warned Legkodymov that Bitzlato's client base consisted of "addicts who buy drugs in [] Hydraโ and โdrug dealers,โ with one senior executive even stressing that Bitzlato should only โnominallyโ fight drug dealers, to avoid hurting the company's bottom line. An internal spreadsheet kept in Bitzlato's shared admin folder encapsulated the company's view of itself: โPositives: no KYC. . . . Negatives: Dirty money. . . .โ
As alleged in the complaint, although Bitzlato claimed that it did not accept users from the United States, it did substantial business with US-based clients, and its customer service representatives repeatedly informed users that they could transfer funds from US financial institutions. In addition, Legkodymov, who managed Bitzlato from Miami in 2022 and 2023, received reports reflecting substantial traffic to Bitzlato's website from US-based internet protocol addresses, including more than 250 million such visits in July 2022.
Legkodymov is accused of running a money transmission business without a license. If he is found guilty, he faces a maximum sentence of five years in prison.
Simultaneously with the arrest announced today, French authorities, in collaboration with Europol and partners in Spain, Portugal and Cyprus, dismantled Bitzlato's digital infrastructure, seized Bitzlato's cryptocurrency and took other enforcement actions.
In addition, the Treasury Department's FinCEN announced an Order pursuant to section 9714(a) of the Russian Anti-Money Laundering Law, as amended, identifying Bitzlato as a "primary money laundering concern" in relation to the illicit Russian finances. The order imposes a special measure that prohibits certain transfers of funds involving Bitzlato by any covered financial institution.
National Cryptocurrency Enforcement Team (NCET) trial attorneys Alexander Mindlin, Scott Meisler and Matthew Blackwood of the Department of Justice Criminal Division and Assistant United States Attorney Artie McConnell for the Eastern District of New York are processing the case, with the assistance of Paralegal Specialist Mary Clare McMahon.
The Justice Department investigated this case in close coordination with French law enforcement authorities and the Treasury Department's FinCEN, who took separate enforcement actions today under their respective authorities. The Department of Justice's Office of International Affairs and the FBI Legal Attachรฉ in France provided critical assistance in this case, with significant support from the department's International Cyber โโOperations Liaison. NCET and the US Attorney's Office for the Eastern District of New York also express their appreciation to the Cyber โโDivision of the Paris Prosecutor's Office and the Cyber โโCommand of the French National Gendarmerie (Cyber โโCrime Investigation Unit / C3N). Customs and Border Protection, the Transportation Security Administration and the New York City Police Department also provided assistance. EUROPOL and the Dutch and Belgian authorities have contributed to the overall investigation with regard to operational experience, coordination and information exchange.
The NCET was established to combat the increasing illicit use of cryptocurrencies and digital assets. Under the Criminal Division, the NCET conducts and supports investigations into individuals and entities enabling the use of digital assets to commit and facilitate a variety of crimes, with a particular focus on virtual currency exchanges, mixing and flipping services and infrastructure providers. NCET also sets strategic priorities regarding digital asset technologies, identifies areas for increased investigative and prosecution focus, and leads the department's efforts to collaborate with domestic and foreign government agencies, as well as the private sector to investigate and aggressively prosecute crimes involving cryptocurrency and digital assets. .
A criminal complaint is simply an accusation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.
