Crypto Exchange Bitzlato Founder Charged With Unlicensed Money Transmitting

cryptocurrency, AML, financial crime, Bitzlato, Anatoly Legkodymov

Cryptocurrency exchange Bitzlato has had assets seized and its founder arrested in the United States.

Anatoly Legkodymov, a Russian national who resides in China and is founder and owner of the Hong Kong-based exchange, was arrested in Miami Tuesday (Jan. 17) and charged with conducting an unlicensed money transmitting business, the U.S. Department of Justice said in a Wednesday (Jan. 18) press release.

In line with the arrest, French authorities and partners dismantled Bitzlato’s digital infrastructure and seized its crypto, according to the release.

In addition, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has prohibited covered financial institutions from being involved in certain transmittals of funds involving Bitzlato, the release said.

“As alleged, the defendant helped operate a cryptocurrency exchange that failed to implement required anti-money laundering safeguards and enabled criminals to profit from their wrongdoing, including ransomware and drug trafficking,” Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division said.

Bitzlato operated globally, told prospective users it required minimal identification and repeatedly accepted fraudulent information in cases in which it did ask for ID, according to the press release.

The exchange became a tool of criminals, received $15 million in ransomware proceeds and enabled the exchange of $700 million in crypto by users of Hydra Market, an illicit marketplace that was shut down by U.S. and German authorities in April, the release said.

Hydra Market was said to be the world’s largest and most prominent darknet market, accounting for 80% of darknet market-related crypto transactions and receiving around $5.2 billion in crypto between 2015 and its closure.

Bitzlato claimed to not accept users from the U.S. but received 250 million visits from U.S.-based Internet Protocol (IP) addresses in July alone, per the release.

If convicted, Legkodymov faces up to five years in prison.

“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,” Deputy Attorney General Lisa O. Monaco said in the release.