In order to identify themselves on the cryptocurrency exchange Bitzlato, users were not required to take selfies or present passports.
For allegedly processing $700 million in illegal funds through the darknet market, Hydra Market, the CEO of cryptocurrency exchange Bitzlato Ltd. was arrested.
Anatoly Legkodymov, a Russian national living in Shenzhen, China, was due to be charged in the Southern District of Florida today.
Legkodymov, the founder and principal shareholder of the cryptocurrency exchange, was detained for allegedly operating a company that transferred and transmitted illegal money in violation of U.S. anti-money laundering regulations.
He is found guilty of operating an unregistered money-transferring business and receives a maximum sentence of five years in prison. The Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury and French authorities both took enforcement action at the same time.
Bitzlato received more than $15 million in ransomware revenue, which was also advantageous.
Anti-Money Laundering Measures Were Not Implemented by the Exchange
Deputy Attorney General Lisa Monaco stated during a press conference that “the Department of Justice dealt a serious blow to the cryptocrime ecosystem” today. “Today’s measures convey a very clear message: you can expect to answer for your crimes in a U.S. courtroom whether you break our laws from China or Europe, abuse our financial system from a tropical island, or anywhere else.
Legkodymov, 40, is suspected of participating in the management of a cryptocurrency exchange that “Failure to put necessary anti-money laundering safeguards in place allowed criminals to profit from their wrongdoing, such as ransomware and drug trafficking, according to Assistant Attorney General Kenneth Polite, Jr. of the Criminal Division of the Justice Department.
The startup Bitzlato promoted itself as one that hardly required its customers to provide identification, stating that neither selfies nor passports [are] required, the omission of know-your-customer (KYC) processes that financial firms are expected to adhere to.
According to the Department of Justice, the cryptocurrency exchange informed its users that they may give information to “straw man” registrants.
Selling Bitzlato as a No-Questions-Asked Crypto Exchange
According to the allegations, Bitzlato offered itself to criminals as a no-questions-asked cryptocurrency exchange and benefited from the deposits of hundreds of millions of dollars as a result, according to U.S. Attorney Breon Peace for the Eastern District of New York.
With Bitzlato, Hydra users transacted over $700 million in cryptocurrencies directly or indirectly. In April 2022, Hydra was shut down by German and American law enforcement.
According to the criminal complaint, Bitzlato allegedly permitted users of its customer service portal to often seek support for transactions with Hydra, which Bitzlato commonly provided, and admitted in discussions with Bitzlato workers that they were trading under assumed names.
Legkodymov and Bitzlato’s other managers allegedly knew that a significant portion of the company’s accounts included illegal activities and that many users registered using false identities.
On May 29, 2019, Legkodymov informed a different coworker using Bitzlato’s internal chat system that the exchange’s users are “known to be thieves, creating accounts using other people’s identity documents.
According to the complaint, despite Bitzlato’s claim that it does not accept US customers, US users were involved in “substanial” business transactions.
Bitzlato’s customer care representatives informed customers that they could fund their accounts using U.S. banking institutions.
Bitzlato’s digital infrastructure was taken down by French authorities, who collaborated with Europol and law enforcement colleagues in Cyprus, Portugal, and Spain. Bitzlato’s cryptocurrency was also seized.
In relation to Russian illegal finance, the Treasury Department’s FinCEN designated Bitzlato as a “major money laundering concern.”
