The founder and majority proprietor of a cryptocurrency trade, Bitzlato Ltd. (Bitzlato), was arrested final night time in Miami for his alleged operation of a cash transmitting enterprise that transported and transmitted illicit funds and that failed to fulfill U.S. regulatory safeguards, together with anti-money laundering necessities.
Anatoly Legkodymov, 40, a Russian nationwide who resides in Shenzhen, People’s Republic of China, is scheduled to be arraigned this afternoon within the U.S. District Court for the Southern District of Florida. French authorities and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) are taking concurrent enforcement actions.
“Today the Department of Justice dealt a big blow to the cryptocrime ecosystem,” mentioned Deputy Attorney General Lisa O. Monaco. “Overnight, the Department worked with key partners here and abroad to disrupt Bitzlato, the China-based money laundering engine that fueled a high-tech axis of cryptocrime, and to arrest its founder, Russian national Anatoly Legkodymov. 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.”
“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,” mentioned Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “The National Cryptocurrency Enforcement Team’s tremendous efforts to disrupt Bitzlato and arrest the defendant demonstrate that we will continue to work with our partners – both foreign and domestic – to combat cryptocurrency-fueled crimes, even if they transcend international borders.”
According to courtroom paperwork, Legkodymov is a senior government and the bulk shareholder of Bitzlato, a Hong Kong-registered cryptocurrency trade that operates globally. Bitzlato has marketed itself as requiring minimal identification from its customers, specifying that “neither selfies nor passports [are] required.” On events when Bitzlato did direct customers to submit figuring out data, it repeatedly allowed them to supply data belonging to “straw man” registrants.
“Institutions that trade in cryptocurrency are not above the law and their owners are not beyond our reach,” mentioned U.S. Attorney Breon Peace for the Eastern District of New York. “As alleged, Bitzlato sold itself to criminals as a no-questions-asked cryptocurrency exchange, and reaped hundreds of millions of dollars’ worth of deposits as a result. The defendant is now paying the price for the malign role that his company played in the cryptocurrency ecosystem.”
As a results of these poor know-your-customer (KYC) procedures, Bitzlato allegedly turned a haven for felony proceeds and funds meant to be used in felony exercise. Bitzlato’s largest counterparty in cryptocurrency transactions was Hydra Market (Hydra), an nameless, illicit on-line market for narcotics, stolen monetary data, fraudulent identification paperwork, and cash laundering providers that was the biggest and longest operating darknet market on this planet. Hydra customers exchanged greater than $700 million in cryptocurrency with Bitzlato, both instantly or by intermediaries, till Hydra was shuttered by U.S. and German legislation enforcement in April 2022. Bitzlato additionally obtained greater than $15 million in ransomware proceeds.
“The 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,” mentioned Assistant Deputy Director Brian Turner of the FBI. “We, along with our federal and international partners, will work relentlessly to disrupt and dismantle these types of criminal enterprises. Today’s arrest should serve as a reminder the FBI will impose risk and consequences upon those who engage in these activities.”
“As alleged today, Legkodymov knowingly allowed Bitzlato to become a perceived safe haven for funds used for and resulting from a variety of criminal activities,” mentioned Assistant Director in Charge Michael J. Driscoll of the FBI New York Field Office. “The FBI and our partners remain steadfast in our commitment to keeping cryptocurrency markets – as with any financial market – free from 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 within the criticism, Bitzlato’s prospects routinely used the corporate’s customer support portal to request assist for transactions with Hydra, which Bitzlato usually supplied, and admitted in chats with Bitzlato personnel that they had been buying and selling below assumed identities. Moreover, Legkodymov and Bitzlato’s different managers had been conscious that Bitzlato’s accounts had been rife with illicit exercise and that a lot of its customers had been registered below others’ identities. For occasion, on May 29, 2019, Legkodymov used Bitzlato’s inner chat system to jot down to a colleague that Bitzlato’s customers had been “known to be crooks,” utilizing others’ identification paperwork to register their accounts. Legkodymov was repeatedly warned by colleagues that Bitzlato’s buyer base consisted of “addicts who buy drugs at [] Hydra” and “drug traffickers,” with one senior government even stressing that Bitzlato ought to fight drug sellers solely “nominally,” to keep away from hurting the corporate’s backside line. An inner spreadsheet saved in Bitzlato’s shared administration folder encapsulated the corporate’s view of itself: “Positives: No KYC. . . . Negatives: Dirty money. . . .”
As alleged within the criticism, though Bitzlato claimed to not settle for customers from the United States, it did substantial enterprise with U.S.-based prospects, and its customer support representatives repeatedly suggested customers that they might switch funds from U.S. monetary establishments. Moreover, Legkodymov – who himself administered Bitzlato from Miami in 2022 and 2023 – obtained experiences reflecting substantial site visitors to Bitzlato’s web site from U.S.-based Internet Protocol addresses, together with over 250 million such visits in July 2022.
Legkodymov is charged with conducting an unlicensed cash transmitting enterprise. If convicted, he faces a most penalty of 5 years in jail.
Concurrent with the arrest introduced immediately, French authorities, working with Europol and companions in Spain, Portugal, and Cyprus, dismantled Bitzlato’s digital infrastructure, seized Bitzlato’s cryptocurrency, and took different enforcement actions.
In addition, the Treasury Department’s FinCEN introduced an Order pursuant to part 9714(a) of the Combating Russian Money Laundering Act, as amended, figuring out Bitzlato as a “primary money laundering concern” in connection to Russian illicit finance. The order imposes a particular measure prohibiting sure transmittals of funds involving Bitzlato by any coated monetary establishment.
National Cryptocurrency Enforcement Team (NCET) Trial Attorneys Alexander Mindlin, Scott Meisler, and Matthew Blackwood of the Justice Department’s Criminal Division and Assistant U.S. Attorney Artie McConnell for the Eastern District of New York are prosecuting the case, with help from Paralegal Specialist Mary Clare McMahon.
The Justice Department investigated this case in shut coordination with French legislation enforcement authorities and the Treasury Department’s FinCEN, each of which took separate enforcement actions immediately below their respective authorities. The Justice Department’s Office of International Affairs and the FBI’s Legal Attaché in France supplied crucial help on this case, with vital assist from the division’s Cyber Operations International Liaison. The NCET and U.S. Attorney’s Office for the Eastern District of New York additionally prolong their appreciation to the Cyber Division of the Paris Prosecution Office and to France’s Gendarmerie Nationale Cyberspace Command (Cyber Crime Investigation Unit / C3N). Assistance was additionally supplied by the Customs and Border Protection, the Transportation Safety Administration, and the New York City Police Department. EUROPOL and Dutch and Belgian authorities have contributed to the general investigation with respect to operational experience, coordination, and information-sharing.
The NCET was established to fight the rising illicit use of cryptocurrencies and digital property. Under the Criminal Division, the NCET conducts and helps investigations into people and entities that allow using digital property to commit and facilitate quite a lot of crimes, with a specific concentrate on digital forex exchanges, mixing and tumbling providers, and infrastructure suppliers. The NCET additionally units strategic priorities concerning digital asset applied sciences, identifies areas for elevated investigative and prosecutorial focus, and leads the division’s efforts to collaborate with home and overseas authorities businesses in addition to the non-public sector to aggressively examine and prosecute crimes involving cryptocurrency and digital property.
A felony criticism is merely an allegation. All defendants are presumed harmless till confirmed responsible past an affordable doubt in a courtroom of legislation.