US authorities have arrested the cofounder of a cryptocurrency exchange, Bitzlato, for allegedly processing $700 million in illicit funds.
On Tuesday, Anatoly Legkodymov, a Russian national living in China, was arrested in Miami on charges that he operated the exchange as an unlicensed money exchange business that ‘in his own words, catered to “known crooks”‘.
Prosecutors said Bitzlato exchanged more than $700 million in cryptocurrency with Hydra Market, an illicit online marketplace for narcotics, stolen financial information, fraudulent identification documents and money laundering services that US and German law enforcement shut down in April 2022.
‘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 Monaco told reporters at a news conference at the Justice Department.
Bitzlato also received more than $15 million in ransomware proceeds, prosecutors said.
‘Despite it being a small name, it carries a lot of weight,’ said Chen Arad, the chief operating officer at Solidus Labs, a crypto market surveillance company.
‘Small actors are not safe and they carry just as much risk as any big-name exchange (or) platform,’ he said.
40-year-old Legkodymov was the cryptocurrency exchange’s cofounder and helped run the company from the Chinese city of Shenzhen.
Messages left on Bitzlato’s automated Telegram support chat service by Reuters were answered with the phrase, ‘Oops, sorry’.
Bitzlato has processed $4.58 billion worth of cryptocurrency transactions since May 3, 2018, prosecutors said, adding a substantial portion constitutes ‘the proceeds of crime’.
It also broke rules requiring significant vetting of customers and failed to meet requirements aimed at preventing money laundering, authorities said.
Bitzlato allegedly serviced US customers and conducted transactions with US-based exchanges and for at least some period of time, it was being managed by Legkodymov while he was in the United States.
The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) said it has prohibited certain transmittals of funds involving Bitzlato after labelling it a ‘primary money laundering concern’ related to Russian illicit finance.
Officials said that Bitzlato had repeatedly facilitated transactions for Russian-affiliated ransomware groups, including the gang behind Conti, which is thought to have links to the Russian government and Russia-connected darknet markets.
By Wednesday, Bitzlato’s website was replaced by a notice saying that the service had been seized by French authorities ‘as part of a coordinated international law enforcement action’.
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