WASHINGTON, Jan 18 (Reuters) - U.S. authorities said on Wednesday they had arrested the majority shareholder and co-founder of Hong Kong-registered virtual currency exchange Bitzlato Ltd for allegedly processing $700 million in illicit funds.
Anatoly Legkodymov, a Russian national living in China, was arrested in Miami on Tuesday on charges of operating the exchange as an unlicensed money-changing business that "in his own words, catered to 'known criminals,'" a senior official said. of the Department of Justice. .
Prosecutors said Bitzlato traded more than $700 million in cryptocurrency with Hydra Market, which they described as an illicit online marketplace for narcotics, stolen financial information, fraudulent identification documents and money laundering services that U.S. and law enforcement German companies closed in April 2022.
"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 within a court of the United States," Assistant Attorney General Lisa Monaco told reporters in a press conference at the Department of Justice. .
Bitzlato also received more than $15 million in ransomware proceeds, prosecutors said. Hydra Market could not immediately be reached for comment.
โDespite being a small name, it carries a lot of weight,โ said Chen Arad, COO of Solidus Labs, a crypto market watchdog.
โSmall players are not safe and carry as much risk as any reputable (or) exchange platform,โ he said.
Authorities described Legkodymov as a co-founder of the cryptocurrency exchange, saying the 40-year-old Russian helped run the company from the Chinese city of Shenzhen. Legkodymov did not immediately respond to an email with questions, and messages left on Bitzlato's Telegram automated support chat service were responded to with the phrase "Whoops, sorry."
Bitzlato has processed $4.58 billion in cryptocurrency transactions since May 3, 2018, prosecutors said, adding that a substantial portion constitutes "the proceeds of crime."
[1/2] A representation of cryptocurrencies in this illustration taken on January 24, 2022. REUTERS/Dado Ruvic/Illustration
It also violated rules that require significant screening of customers and failed to comply with requirements intended to prevent money laundering, authorities said. Archived versions of the Bitzlato website noted that the site's customers could sign up using "just their email."
Prosecutors said Bitzlato knowingly served US clients and transacted with US-based exchanges using US online infrastructure. For at least a period of time, he was in charge of the defendant while he was in the United States, they said.
The charges were filed in conjunction with the US Treasury Department's Financial Crimes Enforcement Network (FinCEN), which said it has barred certain fund transmissions involving Bitzlato from any covered financial institution after tagging Bitzlato Ltd as a "primary money laundering concern" related to Russian illicit activities. Finance.
"Identifying Bitzlato as a top money laundering concern makes the stock market an international pariah," Deputy Treasury Secretary Wally Adeyemo said at the news conference.
Adeyemo said Bitzlato has repeatedly facilitated transactions for Russia-affiliated ransomware groups, including the gang behind Conti, which he says has ties to the Russian government and Russia-connected darknet marketplaces.
Cari Stinebower, a former Treasury Department official and now a partner at the Winston & Strawn law firm, said the sanctions imposed are similar to those provided for in Section 311 of the USA Patriot Act and will make Bitzlato untouchable by the US. US and foreign banks.
"No major financial institution will deal with an entity identified as a primary money laundering concern," it said.
"While US financial institutions will refuse to do business with Bitzlato, (one would expect) other financial institutions to do the same," he added. "The impact will be to drive Bitzlato out of the global financial sector almost immediately."
By midday on Wednesday, Bitzlato's website was replaced by a notice saying French authorities had seized the service "as part of a coordinated international law enforcement action."
Reporting by Daphne Psaledakis, Raphael Satter, Kanishka Singh, Chris Prentice, and Arshad Mohammed; Additional reporting by Hannah Lang Writing by Chris Prentice; Edited by Megan Davies and David Gregorio
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