Crypto Exchange Bitzlato Founder Collared, Charged With $700 Million Financial Fraud

Federal officials announced on Wednesday that a Russian national who operated a crypto exchange that became a harbor for the proceeds of illegal activities has been arrested. U.S. authorities have collared 40-year-old China-resident Anatoly Legkodymov on claims that his Hong Kong-registered crypto trading platform, Bitzlato, processed hundreds of millions of dollars in dirty money. Tuesday night, agents of the […][...]

Federal officials announced on Wednesday that a Russian national who operated a crypto exchange that became a harbor for the proceeds of illegal activities has been arrested.

U.S. authorities have collared 40-year-old China-resident Anatoly Legkodymov on claims that his Hong Kong-registered crypto trading platform, Bitzlato, processed hundreds of millions of dollars in dirty money.

Tuesday night, agents of the Federal Bureau of Investigation apprehended Legkodymov in Miami.

The DOJ said on Wednesday that Bitzlato has been taken offline as part of an “international cryptocurrency enforcement operation.”

Lisa Monaco, the deputy attorney general, described the arrest as a “major blow to the crypto criminal ecosystem.”

Dirty Money Flowing From Crypto Exchange Bitzlato

The DOJ alleged that Bitzlato, either directly or through third-party conduits, exchanged more than $700 million in cryptocurrencies with users of Hydra Market, a darknet marketplace for drugs, fraudulent IDs, and other illegal goods.

The DOJ and German law enforcement took action against Hydra Market, resulting in its closure in April of last year.

According to U.S. Attorney Breon Peace:

“Institutions that trade in cryptocurrency are not above the law and their owners are not beyond our reach.” 

The personalities involved in the operation, according to Monaco, engaged in a “coordinated campaign of disruption” that included law enforcement activities in a number of European nations and the confiscation of Bitzlato’s computer networks.

The Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department issued an order naming Bitzlato as a “major money laundering concern” in relation to Russian illegal funding.

Bitzlato And Its U.S. Customers

Legkodymov is also accused of executing Bitzlato transactions from Miami between 2022 and this year, as well as receiving reports of “significant traffic” to its website from IP addresses located in the United States. According to the DOJ, this includes more than 250 million visitors in July 2022.

Reuters reported that Bitzlato’s website was replaced on Wednesday with a notification stating that the service had been deactivated by French authorities.

Bitzlato has processed approximately $4.5 billion in bitcoin transactions since 2018, according to regulators.

In the meantime, the proprietors of Bitzlato revealed via Telegram that the exchange had been compromised.

They informed customers that withdrawals were suspended indefinitely and requested that they desist from sending coins to the site until the issue was rectified.

On Wednesday, Legkodymov was in detention, and it was unknown whether he had an attorney who could speak on his behalf.

According to the DOJ, if convicted of operating an unlawful money transmission business, he faces a maximum of five years in jail.

Chainalysis, a blockchain analytics startup, revealed last week that illicit crypto transfers reached an all-time high of $20 billion in 2022, primarily as a result of the surge in sanctioned crypto addresses.

Featured image by Ronstik/Alamy

Source: Bitcoinist.com