The U.S. Department of Justice (DoJ) on Wednesday introduced the arrest of Anatoly Legkodymov (aka Gandalf and Tolik), the cofounder of Hong Kong-registered cryptocurrency change Bitzlato, for allegedly processing $700 million in illicit funds.
The 40-year-old Russian nationwide, who was arrested in Miami, was charged in a U.S. federal courtroom with “conducting a cash transmitting enterprise that transported and transmitted illicit funds and that failed to satisfy U.S. regulatory safeguards, together with anti-money laundering necessities,” the DoJ mentioned.
According to courtroom paperwork, Bitzlato is alleged to have marketed itself as a digital forex change with minimal identification necessities for its customers, breaking the principles requiring the vetting of consumers.
This lack of know your buyer (KYC) enforcement led to the service changing into a “haven for prison proceeds” and facilitating transactions price greater than $700 million on the Hydra darknet market previous to its shutdown by regulation enforcement in April 2022, the criticism alleged.
“The defendant helped function a cryptocurrency change that didn’t implement anti-money laundering safeguards and enabled criminals to revenue from their wrongdoing, together with ransomware and drug trafficking,” Assistant Attorney General Polite said.
What’s extra, Legkodymov and different senior executives have been accused of turning a blind eye to illicit exercise happening on the platform regardless of being conscious that its customers have been “recognized to be crooks” and registered accounts utilizing stolen id paperwork.
“An inner spreadsheet saved in Bitzlato’s shared administration folder encapsulated the corporate’s view of itself: ‘Positives: No KYC. . . Negatives: Dirty cash. . . ‘,” the DoJ mentioned.
The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) described Bitzlato as a “major cash laundering concern” that enabled ransomware actors comparable to Conti to launder the ill-gotten beneficial properties.
Concurrent with the arrest, Bitzlato’s digital infrastructure has been seized and dismantled by authorities in France, Spain, Portugal, and Cyprus as a part of a world Europol-led train.
“As alleged, Bitzlato bought itself to criminals as a no-questions-asked cryptocurrency change, and reaped tons of of tens of millions of {dollars}’ price of deposits because of this,” U.S. Attorney Breon Peace mentioned.
Blockchain analytics agency Chainalysis, in February 2022, revealed that Bitzlato “acquired $206 million from darknet markets, $224.5 million from scams, and $9 million from ransomware attackers.”
Following the Russo-Ukrainian warfare final 12 months, the high-risk change additionally emerged as a “cashout vacation spot” for Project Terricon, a terrorist group soliciting cryptocurrency donation to help militia entities within the Donbas area, the corporate famous.
In all, Bitzlato is estimated to have acquired $2.5 billion in cryptocurrency between 2019 and 2023, 53% of which originated from unlawful and dangerous sources.
“If cybercriminals cannot reliably convert the cryptocurrency generated by their actions into money, the incentives to commit these crimes plummet,” Chainalysis mentioned, including the takedown “represents one other disruption of a key cash laundering service.”
The improvement additionally comes every week after Europol took aside a community of name facilities in Bulgaria, Cyprus, Germany, and Serbia for luring victims into investing massive quantities of cash in fraudulent cryptocurrency schemes, incurring tens of millions in losses.