US arrests founder of HK-registered crypto exchange Bitzlato for fraud

US arrests founder of HK-registered crypto exchange Bitzlato for fraud

FILE PHOTO: Representations of cryptocurrencies plunge into water in this illustration taken, May 23, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

Anatoly Legkodymov, founder and majority owner of Hong Kong-registered Bitzlato, was arrested by the US authorities on Tuesday night in Miami for illicit transfer of $700 million via its crypto exchange. 

The US authorities said on Wednesday that Legkodymov, a Russian national who resides in Shenzhen of China, has been allegedly operating a crypto exchange that ‘failed to implement anti-money laundering safeguards’ as well as ‘enabling criminals to profit from their wrongdoing’ such as ransomware and drug trafficking, said Assistant Attorney General for the criminal division in the United States Department of Justice, Kenneth Polite, in a release. 

Bitzlato, which operates across the globe, has billed itself as a firm that does not require identity verification from its customers; even if the firm did direct users to file identifying information occasionally, it permitted the users to provide information using the identities of “straw man”, per the release and court documents. 

In particular, Bitzlato enabled the users of Hydra Market — the largest and longest running dark web market in the world — to exchange over $700 million in crypto either via its platform or intermediaries until the darknet market was shut by the US and German law enforcement agencies in April 2022.

Bitzlato was also alleged to have received over $15 million in ransomware proceeds. 

Although Bitzlato said it did not take users from the US, the firm conducted “substantial business” with US-based users; even Legkodymov himself managed the firm while residing in Miami in 2022 and 2023. Legkodymov could face up to five years in prison if convicted of operating an illegal money transfer business. 

“Today the Department of Justice dealt a significant blow to the cryptocrime ecosystem,” Deputy Attorney General of the United States, Lisa Monaco, said in the release.

“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,” she added.

An archived version of Bitzlato’s official site showed that it has been seized by the French authorities. 

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