Justice Department Shuts Down $700 Million Russian Crypto Exchange

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WASHINGTON, DC – JANUARY 18: Assistant Attorney General Lisa O. Monaco delivers remarks during a news… [+] conference on recent enforcement actions against cryptocurrency at the United States Department of Justice Building on January 18, 2023 in Washington, DC. Justice Ministry officials held the press conference alongside Treasury Ministry officials to announce the recent arrest of Russian national Anatoly Legkodymov, the founder of Bitzlato, an online criminal platform. (Photo by Anna Moneymaker/Getty Images)

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The United States Department of Justice announced on Wednesday that it has indicted the founder and majority owner of the Hong Kong-registered exchange, Bitzlato, for transmitting money without a license, the exchange having facilitated more than 700 million dollars of illicit funds.

Anatoly Legkodymov was arrested in Miami last night following a years-long joint investigation by the Department of Justice, the Treasury Departments Financial Crimes Enforcement Network and French authorities, according to a press release. .

As alleged, Bitzlato sold itself to criminals as a cryptocurrency exchange with no questions asked and in the process garnered hundreds of millions of dollars in deposits, US Attorney Breon Peace said.

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The Hong Kong-registered exchange marketed itself as a peer-to-peer crypto exchange that allowed customers to exchange and trade 60 supported cryptocurrencies, including bitcoin, ethereum, bitcoin cash and the monolith ruble, without an intermediary. The charges allege that the exchange only required minimal user identification, with no selfies or passports required.

In doing so, the exchange has become a haven for criminals looking to store their cryptocurrency with little to no know-your-customer (KYC) procedures. The charges claim that Legkodymov and other Bitzlato officials were aware of the presence of illicit activity within the exchange, citing an example on May 29, 2019 where Legkodymov wrote in Bitzlatos internal chat system that the Exchange users were known to be scammers.

Their biggest counterpart, according to the charges, was the Hydra marketplace, a Russian dark web used to sell illegal drugs, stolen financial information and money laundering services. Hydra Market users used Bitzlato until authorities seized the market in April 2022.

News of the Bitzlatos seizure has caused mixed reactions within the crypto industry as experts await news regarding more popular crypto cases, including pending charges against FTX founder Sam Bankman-Fried, not the lesser known exchange.

I’ve worked in space since 2013. I’ve never heard of it, tweeted Hailey Lennon, partner at Brown and Rudnick and Forbes, legal expert.

But exchange connections to Russian groups have been documented since June 2022, when cybersecurity research firm Chainalysis found that Bitzlato had facilitated the laundering of crypto money worth around $1 billion since 2019. .

The report revealed that Bitzlato received $206 million from darknet markets, $224.50 million from scams, and at least $9 million from ransomware attackers.

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